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Post-Brexit UK VAT changes on the sale of goods to customers

It’s important for businesses outside of the UK (mainly those in Europe) to note the VAT changes of the sale of goods to customers that will come into effect post the Brexit transition period. This article highlights the coming changes and details what non-resident businesses can do to prepare for these changes. 

From 1 January 2021, there will be significant changes to VAT accounting by non-UK established sellers who sell goods to UK businesses and consumers directly and using Online Market Places (OMPs) that “facilitate” sales of goods.

What will change for businesses selling goods to customers post Brexit? 

Businesses can expect the following changes: 

(The below has been sourced from our partners DLA Piper, read their article on the topic here)

  • The GBP15 Low Value Consignment Relief on imported goods will cease to apply. VAT will be due on all consignments arriving into the UK (unless the goods are eligible for VAT relief e.g. personal protective equipment).
  • Most overseas sellers selling goods located outside the UK at the time of sale valued at GBP135 or less will now have UK VAT obligations.
  • OMPs that “facilitate” sales of goods will broadly be responsible for the collection and payment of VAT.

Improved VAT Compliance

Quite like the EU with their EU VAT Package, the UK is also creating guidelines to streamline and improve VAT compliance by imposing collection and payment responsibilities onto the OMPs that facilitate sales. The objective is even the playing field across the continent.

How can your business prepare for the coming VAT changes post Brexit

The below outlines steps a business can take to ensure that they are ready for the above changes and avoid non-compliance pitfalls and possible penalties.

VAT registration

Businesses should look to completing their VAT registrations sooner rather than later as there will most likely be an influx of late applications and HMRC delays. Any non-UK businesses who need to register for VAT in the UK are advised to act now as late registrations ultimately lead to penalties.

Consignment value Thresholds

It’s important to ensure your contractual terms and the way goods are marketed is correct. This is because both determine whether the value of the consignment exceeds the GBP135 threshold or not. There is expected to be extra scrutiny around this threshold. Ultimately, if the wrong method of VAT accounting is selected, HMRC will expect the business to unravel the VAT accounting (source).

Import VAT

With regards to importing goods into the UK, it’s important to note that the owner of the goods at the time of importation is eligible to reclaim the import VAT. That means that businesses should make sure that their supply chains and delivery logistic solutions are structured efficiently for tax purposes.

Need help with the UK VAT changes on the sale of goods to customers?

It can be highly administrative to conduct registration, filing and accounting in a foreign country. However, Vatglobal is able to offer businesses both outside of the UK and within the UK with guidance in all areas of VAT compliance in light of the post-Brexit changes.

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