Brexit: how will selling online to EU customers change?

When did online selling rules change?

The UK left the European Union (EU) on 31 January 2020, but a Brexit transition period then began, with its deadline of 1 January 2021. Negotiations between the EU and UK were successfully concluded on 24 December 2020, resulting in a 1,240-plus page agreement that, according to the UK government, preserved “the UK’s zero-tariff and zero-quota access to the bloc’s [EU’s] single market”.

So, what’s changed when it comes to trade?

Under the EU-UK agreement, no tariffs will be introduced, which is welcome news for UK businesses that buy or sell from EU countries. Tariffs could have added significant cost to sales, which could have brought a drop in many UK exports, while import costs could have risen significantly for some UK businesses who buy goods from suppliers in EU countries.

Because the UK is no longer part of the EU Customs Union, there are fears of serious border delays, which were indeed evident in the weeks following the end of the transition. Goods entering the EU from Great Britain (England, Scotland and Wales) face large amounts of new paperwork and checks, including customs declarations, rules of origin checks, product safety certification and food inspection.

There are VAT changes (covered briefly below) that UK-based online shops need to be aware of.

How will VAT rules change for UK online sellers?

If goods sold online are shipped from the UK, whether to customers in the EU or non-EU countries, they will be treated as exports from the UK and will be zero-rated for VAT purposes (you will need to retain evidence). That means UK VAT is not charged at the point of sale.

For consignments sold and sent to EU customers up until June 2021, if the value is less than €22, it will be exempt from VAT and duty under existing low-value consignment relief. Import VAT and duty is payable on consignments with a value of more than €22. To avoid any hold-ups and ensure the sale, a UK seller can make the required declaration and payment rather than the customer.

However, the low-value consignment relief for goods worth less than €22 ends in July 2021 (originally this was planned for Jan 2021, but the EU delayed it because of COVID-19). After this change has been introduced, VAT and duty will be payable in the customer’s country on all consignments.

• Visit GOV.UK for more information about “exports, sending goods abroad and charging VAT”.

The potential increase in online spending

Consumer spending habits are likely to change over the coming years. Online sales are increasing every year and this has been further accelerated by the Covid-19 pandemic. It is quite likely that Brexit will also lead to more consumers shopping online. With the high street in trouble and the economy in recession, consumers will be looking for the competitive pricing offered by online retailers. 

However, as we’ve highlighted, the UK being outside of the EU will create complications for businesses and consumers alike. The scope of these complications remains to be seen during the early days of the new trade agreement. 

What about goods sent by post?

According to GOV.UK: “You can zero rate goods you send by post to an address outside the UK, unless they are being sent from Northern Ireland to an EU country.”

You’ll need to use form ‘Certificate of posting goods form 132’ or ask the Post Office for a certificate of posting. If you’re using Royal Mail Parcel Force, you will be given a dispatch pack with accounting documents, a customs export declaration and a receipt copy. The dispatch pack goes with the goods. For sales from Northern Ireland to EU customers you do not need to fill in a customs export declaration form.

If you use courier or fast parcel service provider, they’ll normally give you an airways bill number for each shipment, which proves the good have indeed been shipped overseas.

• Visit GOV.uk for more information.

What if I sell digital services to EU consumers?

Currently, for services, “place of supply” rules determine the country in which you charge and account for VAT.

Once the Brexit transition period is over, if you sell digital services to EU customers, you’ll no longer be able to use the UK’s VAT Mini One Stop Shop (MOSS) service to declare sales and pay VAT due in EU member states.

Instead, as explained on government website GOV.UK: “For sales made from 1 January 2021, you’ll need to register for either:

• VAT MOSS in any EU member state or
• VAT in each EU member state where you sell digital services to consumers.”

If you’re currently using the UK VAT MOSS service, the final return period will be the period ending 31 December 2020 and you should only include sales made before 1 January 2021 in your final return, which should be submitted by the 20 January 2021.

Does my business need to get an EORI number?

According to GOV.UK: “From 1 January 2021, you’ll need an EORI [Economic Operator Registration Identification] number that starts with GB to move goods in or out of the UK. If you already have an EORI number that starts with GB, you can continue to use it.”

You don’t normally need an EORI number if you sell services or need to move goods between Northern Ireland and the Republic of Ireland.

If you currently despatch things you sell online by post or courier, according to GOV.UK: “If you use a post or parcel company to move goods, they’ll tell you if you need an EORI number.”

But: “You’ll need an EU EORI number if your business will be making customs declarations or getting a customs decision in the EU. Get this from the customs authority in the EU country where you submit your first declaration or request your first decision.”

It only takes 10 minutes to apply for an EORI number. You’ll either get one straight away or within five working days, if HMRC needs to carry out additional checks.

Further sources of advice and information

The Chartered Institute of Taxation website provides a list of key VAT issues UK businesses should consider as a result of Brexit. Similarly, there are lists for Customs duty and Excise duty.

The above information merely highlights some changes that UK-based online sellers will need to prepare for post Brexit transition period, but it’s by no means comprehensive. Seeking tailored guidance from a tax expert who is fully up to speed with latest developments is advised.

For general advice, you can ring the government’s Business Brexit Helpline on 0300 2000 900 (Monday to Friday, 9am to 6pm).