On 10 December, Ecommerce Europe’s national association member Consorzio Netcomm, in collaboration with Alan Rhode (Co-founder of Taxmen.eu), organised an online workshop to discuss the new UK e-commerce rules on VAT and customs that will start applying from 1 January 2021, independently from what will happen with Brexit, and Brexit itself.
The workshop took stock of the recent developments on the EU-UK negotiations, which depict an unlikely scenario of reaching a free trade agreement (FTA) before 31 December. Further meetings of the negotiating pool will take place in the following days, attempting to reach an agreement. Should no deal be found, the trade between EU and UK would be subject to WTO rules until a bilateral deal is found. For this reason, the European Commission had published on 10 December a set of contingency measures to ensure basic reciprocal road and air connectivity between the EU and the UK from the end of the current transition period. If no EU-UK trade deal is found, the contingency measures will cater for the period of absence of an agreement. If no agreement is reached at all, the contingency measures will end after a fixed period. Otherwise, if a free trade agreement (FTA) is reached before 31 December 2020, customs will not be applied to EU products imported to the UK, while VAT would be applied. However, the FTA would not apply to non-EU products traded by European e-merchants.
Furthermore, the webinar provided a detailed overview of the new UK rules applying to VAT imports as of 1 January 2021, which include the removal of the VAT exemption for small consignments below £ 15, and the rule of VAT being collected at the point of sale for consignments below £ 135. The new rules also include a change in the role of online marketplaces (OMPs), with two strands of the changes according to whether the OMP facilitates the sale:
- If an OMP is not involved in facilitating the sale, there will be a direct supply from the seller to the consumer, which will be deemed to take place in the UK and so liable to UK VAT. So, for goods sent from overseas and sold directly to UK consumers without OMP involvement, the overseas seller will be required to register and account for the VAT to HMRC.
- If an OMP is involved in facilitating the sale, they will be deemed, for VAT purposes, to be making the supply to the UK consumer, which will be deemed to take place in the UK with UK VAT chargeable accordingly. Therefore, the OMP will be responsible for collecting and accounting for the VAT.
There are some exceptions to these rules, one of which is the trade flow with Northern Ireland, where the intra-EU rules will continue to apply. Lastly, it was made clear that the new set of UK rules will apply to goods sold after 1 January 2021 and will not apply to goods sold before 31 December 2020 and shipped after 1 January.
Ecommerce Europe will continue to provide guidance its members on the new rules that will apply in UK from 1 January 2021 and in the whole EU from 1 July 2021. For more information, please send us an e-mail to email@example.com.