Preparing for Brexit

by | Oct 1, 2020

Brexit preparation – what about changes to digital services and small value goods?  

Many of our clients have recently received correspondence from HMRC in connection with trading with the EU from 2021. This letter concentrated on the importation of large volumes of goods, but there are also significant changes for digital services and small value goods supplied across borders from 1 January 2021.

We have looked at this in the past and below you will find links to our earlier blog posts.  However, those who sell digital services (eg e-books) to non-business customers in the EU, will no longer enjoy an exemption from VAT MOSS reporting where annual sales are less than £8,818 per year. The business will have to register for VAT in an EU country in order to report and pay VAT on all digital service sales under the non-union VAT MOSS scheme. There is no de-minimise turnover limit for this non-union scheme so ALL sales of digital services to non-business customers in the EU must be reported.

Many small businesses sell goods via the Amazon online marketplace using Fulfilment by Amazon (FBA). To avoid being blocked from the FAB programme they will need to move some of their goods into one of Amazon’s EU fulfilment centres in France, Spain, Germany, Italy, Poland or the Czech Republic.

Any UK business moving goods into the EU will need to update their commercial terms (known as Incoterms) to make it clear who is responsible for VAT, customs and tariffs at the border. The UK business needs to choose whether they use the “delivered duty paid” (DDP) terms or delivered at place (DAP) terms.

Under DDP the UK business needs to pay the EU import VAT and customs tariffs on the goods it sends to the EU, as well as complete export (for the UK) and import customs (for EU) declarations. The FBA agreement is likely to require a DDP arrangement. The UK business may also need an EU VAT number to pay and declare the import VAT in the EU, and will need both a UK and an EU EORI number.

UK business and non-business customers who buy goods from EU suppliers that are worth less than £135 will have to pay VAT on those goods at the checkout. Online marketplaces in the UK will become the deemed seller of imported goods worth less than £135, so must calculate the VAT and tariffs and bill the UK customer at the checkout.

Relevant earlier articles

https://www.abggroup.co.uk/services/tax-consultancy/eori-moss-post-december-2020

https://www.abggroup.co.uk/publications/resources/tax/vat/vat-mini-one-stop-shop-moss

Other links

https://www.gov.uk/prepare-to-export-from-great-britain-from-january-2021

https://www.gov.uk/government/publications/vat-mini-one-stop-shop-non-union-return-guides

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