VAT: Brexit outcomes – retailers

By   19 January 2021

I been asked many times about the VAT position of UK residents buying goods online (and also by more traditional methods) so I thought a brief overview would be helpful.

It has been reported in the media that some overseas retailers have stopped selling to UK customers. This is a commercial decision and is not necessarily solely due to Brexit (although, clearly that hasn’t helped).

What has changed?

Pre Brexit, under the Distance Selling rules, VAT at the rate applicable in the seller’s country would be chargeable by overseas suppliers to UK recipients. This was in the same way as a domestic sale. There were then thresholds which, when breached, resulted in the seller registering in the customer’s country, but these were rarely exceeded by small or SME businesses. The Distance Selling rules still apply to EU Member States, but not the UK.

As the UK is now a ”third country” sales to the UK from the EU which were previously intra-community sales are now imports. From 1 January 2021, sellers of goods B2C (to UK individuals) with a value below £135 – so called low value consignments are required to VAT register in the UK – more details here.  Clearly, many businesses are loath to do this hence their refusal to sell to UK customers. This change is not a result of Brexit but was a measure to level the playing field between EU and non-EU supplies (the latter often escaping the tax completely). From 1 July 2021 similar rules will apply to UK businesses selling to individuals in the EU, although there is likely to be a simplification measure; the so-called One Stop Shop (OSS).

Additionally, UK customers are usually responsible for the new post-Brexit import of goods, so there may be unexpected new VAT, duty and courier costs when buying certain goods from EU countries. This is similar to buying goods from any other country in the world.

It would appear that there will be a reduction in cross-border trade (in both directions) with the UK, and that is without factoring in shipping issues and delays at new borders.