Brexit has now been in force for several weeks and slowly light comes into the darkness. At the end of last year, a lot was still unclear about the Brexit. For example, many traders relied on the free trade agreement, which did not come into effect as initially planned, and the operators of many online marketplaces often did not inform the traders active there about changes until mid of December.
Last Updated on 21 February 2021
Of course, this late provision of information has caused uncertainty among online sellers as well as all other stakeholders concerned, and so the year 2021 started very hesitantly in this respect. Yet now would be a good time to continue selling in the UK.
Various issues have been clarified in the last month and when having the right setup and meeting the regulations, it can be even more profitable to sell in the UK now. In this article we have summarised all the already known and all the newly gained knowledge in the area of VAT and customs that online traders should be aware of.
1. General Information
2. NEW VAT REGULATIONS
2.1 VAT Liability of online Marketplaces
2.2 £135 exemption amount
2.3 Export delivery via online shops
2.4 Export delivery via online marketplaces
3. NEW CUSTOMS REGULATIONS
3.1 Duty-free Trade between the UK and the EU
3.2 Which consequences are there for online sellers?
4 MARKING AND LABELING REQUIREMENTS
4.1 UK – Marking and labeling requirements – Export
4.2 UK – Product approvals and labeling requirements – Import
5. Special case Northern Ireland
6. Brexit and E-Commerce: Changes for EFN and Pan-EU sellers in the UK
7. Does it make sense to continue selling in the UK?
Since 1 January 2021, the UK is no longer part of the European Union. This also means, that the UK can no longer benefit from the EU VAT regime, the single market and the customs union.
The United Kingdom is now seen as a third country when it comes to VAT and customs and also the former EU regulations, like rules for labeling were replaced by new UK rules. Naturally, this changes e-commerce and online selling between the EU and the UK drastically.
These are the main VAT changes for online sellers:
- Abolition of the Low Value Consignment Relief, which exempts import VAT on consignments of goods worth £15 or less
- Online marketplaces are liable for the collection of VAT.
- For goods shipped from overseas and sold directly to UK consumers (excluding marketplaces), the overseas seller need to register for and pay VAT in the UK
- For sales of goods by overseas sellers where the goods are already in the UK at the point of sale, the responsibility for charging VAT is transferred from the overseas seller to the marketplace operator
- Overseas sellers continue to be responsible for charging VAT on goods already in the UK and sold directly to UK consumers without the involvement of marketplaces.
NEW VAT REGULATIONS
First of all, let’s talk about VAT and taxation. Online traders selling between the UK and the EU should be aware that they are now dealing with two tax regimes.
They must comply with the requirements for imports/exports leaving/reaching the EU, plus the corresponding requirements in the United Kingdom for goods leaving/entering the UK. But also duties of online marketplace providers were affected by the Brexit.
VAT Liability of online Marketplaces
A far-reaching change concerns the tax liability of online marketplaces. Since 1 January 2021, marketplaces such as Amazon, eBay & Co. are under certain conditions liable for VAT in the UK.
The transfer of VAT obligations of the marketplace traders is transferred to the marketplace operators themselves. In these cases, the marketplace will invoice the buyer directly and pay the outstanding amount to the UK tax authorities, the HMRC. It is also obliged to issue an invoice to the buyer.
Online marketplace informed sellers active on their platforms rather late, in the mid of December 2021. This has led to many sellers being a bit careful with selling in the UK as they wanted to wait until things are getting clearer.
Mentioning the new VAT liability of online marketplaces is crucial to make sense of the VAT and customs regulations that came into force on 1 January 2021.
£135 exemption amount
For foreign mail order companies (in particular online traders, online marketplaces) that are already registered under the previously applicable regulations for VAT in the UK, the existing VAT registration can also be retained for the new regulations. The following regulations apply to small consignments:
Foreign trader supplies to UK consumer
- No VAT-free delivery possible, the rules of a domestic delivery apply, registration is required.
- Under a value of £135, no import VAT is charged at customs clearance.
Foreign trader supplies to UK trader
- A VAT-exempt supply is possible if the value of the goods is less than £135.
- The buyer must provide his UK VAT registration number and pays UK VAT under a reverse charge procedure.
- The supplier refers to the reverse charge procedure in his invoice.
It is important to distinguish between selling from the EU into the UK, the other way around, and via an online shop or via an online marketplace.
Export delivery via online shops
When selling via an online shop from the EU (in the following we use France as an example) to the UK, you might have to get a British VAT ID. However, not necessarily. Decisive is the value of the goods of the order (in the cart in your shop) – is it above or below £135?
Value less than £135
In this example, the seller is based in France and selling orders from his online shop (with a value of less than £135) into the UK
For the trader in France, this is an export delivery that is exempt from tax. Therefore, neither customs duties nor import VAT have to be paid in the UK.
The British VAT must be shown on the invoice, which is then paid by the end customer.
VAT Duties: The seller needs to register for VAT in the UK and file returns and pay VAT accordingly.
Value above £135
In this example, the seller is based in France and selling orders from his online shop (with a value of more than £135) into the UK
When selling from France to the UK, it is a so-called tax-free export delivery. This is initially tax-free, but when importing into the UK you have to take care of the import VAT and any customs costs that may arise.
VAT Duties: Sellers do not necessarily have to register for VAT, as import VAT and customs can both be taken over by an intermediary (e.g. logistics provider). If you are already registered for VAT in the UK or if you need to do so for other reasons, you can declare it yourself in the VAT returns you need to file anyways.
Export delivery via online marketplaces
When selling via online marketplaces like Amazon or eBay, under certain conditions the marketplaces themselves are liable for VAT and VAT payments like already stated above. This being said, it is again crucial to take a look on the order value limit of £135.
Value less than £135
In this example, the seller is based in France and selling orders that were made on an online marketplace (with a value of less than £135) into the UK
The sale from France to the UK via an online marketplace is a so-called tax-free export delivery.
Since in this example the value of the goods in the shopping cart does not exceed £135, the marketplace operator in the UK is liable to collect and pay VAT.
VAT Duties: Since the marketplace is responsible for handling the VAT in the UK in this scenario, there are no VAT and registration obligations for the French seller.
Value above £135
In this example, the seller is based in France and selling orders that were made on an online marketplace (with a value of more than £135) into the UK
The sale from France to the UK via an online marketplace is a so-called tax-free export delivery.
In contrast to the example just given with a goods value of less than £135, where the marketplace is responsible for handling the VAT, with a goods value of more than £135 the online trader must take care of all VAT-related tasks and the marketplace operators are not liable for VAT!
VAT Duties: The online seller is responsible for VAT! That means he/she has to register for VAT, file quarterly returns, etc.
NOTE: The value of the purchased goods in the cart is decisive when talking about the £135 limit, not the value of a single product. As it is hard to estimate how many items someone will put in his cart when shopping online, in most cases the seller and not the online marketplace will be liable for VAT!
Delivery to FBA warehouses in the UK
Having talked about different scenarios for sales from the EU to the UK, we now look at the regulations for delivery in Amazon’s fulfilment centre.
Delivery to fulfilment centres in the UK
In this example, the seller is based in France and shipping stock into warehouses in the UK
The delivery from France to a fulfilment centre in the UK is a non-taxable transaction, however, receipts for these shipments (export documents) must be submitted (and this can happen up to 10 years afterwards. So, keep them well!).
As you are again importing goods into the UK, again import VAT and customs duties arise!
Delivery from fulfilment centres in the UK
In this example, the seller is based in France and fulfilling orders that were made on an online marketplace from his UK warehouses to customers in the UK
You have now shipped your inventory to a warehouse in the UK and want to sell and ship it to UK customers. Here things are getting a bit tricky. From a legal perspective, these sales are considered as a tax-free delivery to the marketplace (and not to the final customers). Therefore, the marketplace has to take care of raising and declaring VAT.
However, the sellers still have to declare these sales to the marketplace in the UK. From a seller’s perspective, these sales are tax-free.
Intra-community supplies & Export deliveries
Now let’s take a look on what intra-community trade, and the end of it, means for deliveries between the UK and the EU.
Products sold from one EU member state to another are so-called intra-community supplies. With the UK having left the European Union, goods sold from the EU to the UK are no longer treated as intra-community supplies, but as export deliveries.
“Intra–Community Supply is the sale of goods by a company situated in the European Union and subject to VAT (Value Added Tax) to a company situated in another European Union country. Intra-Community supply involves exemption of VAT in the country of the seller.” Source: gefco
Online sellers must provide export documents for export deliveries if they do not want to risk losing the tax-free status on their sold goods.
EC Sales List and Intrastat reporting
With the UK no longer being part of the EU, the obligation to submit the EC sales list/recapitulative statement for intra-Community deliveries of goods and services as well as the duty for Intrastat reporting are no longer required.
Need of fiscal representation
As the UK is no longer part of the EU, online sellers and businesses located in the UK will need to appoint a fiscal representative in an EU member state if the seller has VAT duties in this country. At least this was the legal situation at the beginning of the year.
Ever since, many EU countries have confirmed that appointing a fiscal representative will not be necessary in their country as this will make selling between Europe and the UK much easier. More and more EU countries are likely to follow this development, so to check whether you need a fiscal representative or not, check for specifically to the country concerned.
End of Triangulation VAT rules
Online sellers in Europe will no longer be able to use the UK in a supply chain triangulation simplification. Therefore, the whole supply chain a sellers uses might have to be reformed.
NEW CUSTOMS REGULATIONS
What do I need to know about customs?
The biggest change in terms of customs is probably that you now have to think about it again. With the UK not being part of the EU anymore, naturally, the UK is no longer part of the European custom union.
It is therefore treated as a third country which means all imports and exports of goods must be cleared through customs. Even if a trade deal has been agreed.
Imports of goods from the UK into the EU follow the same processes as imports of goods from any other non-EU country, such as China.
Exports of goods require export declarations made to customs. This can happen electronically unless the consignment has a value of up to 1,000 € or 1,000 kg. In this case, oral declarations are also fine.
Duty-free Trade between the UK and the EU
Since the beginning of the year, only products with a so-called certificate of origin from the EU are duty-free for trade between the EU and the UK. This means that the goods originated in the EU or were sufficiently processed or changed within the European Union. If this is the case, no customs duties have to be paid in the UK.
If certificates of origin are traded duty-free, the trader must record the proof that the product is of origin on his invoice. This note on the invoice can be added by the sellers himself up to an invoice amount of €6000. If the value of the invoice is above €6000, the sellers need to apply for this certificate at customs. The seller will then become a registered exporter.
Which consequences are there for online sellers?
With these new customs regulations being valid since the beginning of the year, online sellers need to take care of various tasks and regulations in order to continue selling between the EU and the UK.
When importing into the UK or exporting into the EU and if not being based there, it is necessary to appoint a representative to take care of customs declarations.
No matter if a customs representative or you yourself take care of the customs declaration, you will definitely need an EORI number to do so and to meet the customs regulations.
The EORI number (Economic Operators Registration and Identification number) was introduced to identify economic operators within the EU in a uniform way, regarding their relation and interaction with the customs authorities and can be seen as a kind of customs number. >More about the EORI Number<
Importer of Record
To determine the customs duties and who is responsible for it, it is necessary to take a look on who the so-called Importer of Record is.
“Importer of record is a term used in customs law. It refers to an importer, whether an entity or individual, who is responsible for ensuring that legal goods are imported in accordance with the law of the place. Importer is responsible for filing legally required documents.” Source: definitions.uselegal.com
It is necessary to have British customs tariff numbers bindingly determined to avoid incorrect customs duties or delayed deliveries. Fot his, the so-called rules of origin have to be met in order to avoid tariff evasion by redirecting delivery through non-tariff countries.
MARKING AND LABELING REQUIREMENTS
UK – Marking and labeling requirements – Export
Products exported from the EU to the UK must comply with UK regulations and standards since the beginning of the year. They are subject to all relevant regulatory import and other controls, customs and VAT.
In future, goods subject to mandatory marking that are placed on the market in the United Kingdom must be marked with the label UKCA (United Kingdom Conformity Assessed). This UK label, introduced on 1 January 2021, is now replacing the CE mark in the UK.
Legally CE marked products may continue to be marketed in the UK until 31 December 2021. Of course, they must comply with UK and EU requirements.
UK Approved Bodies
After the UK’s exit from the EU, products in the UK are initially subject to the same safety standards and norms as in the EU. The harmonised EU standards were converted into so-called UK designated standards. The CE marking and conformity assessments issued by an EU-approved certification body are still valid.
UK – Product approvals and labeling requirements – Import
However, products imported from the European Union into the UK are also subject to a wide range of requirements. EU regulations are decisive here.
Product approvals granted in the UK
Goods from the UK must comply with the national requirements of the EU Member State into which they are imported. With the UK’s withdrawal, UK testing institutes lose their status as “Notified Bodies” and can no longer carry out conformity assessments valid in the EU. Certificates from UK Notified Bodies will lose their validity in the remaining 27 EU Member States.
British conformity assessments lose their validity in the EU. This means that re-certification of the affected products is necessary. Please note that it is possible to have an existing certificate transferred to another EU member state.
The CE mark proves that a product meets specified safety, environmental and health requirements. Through a “conformity assessment procedure”, a manufacturer proves that the safety requirements laid down in EU directives are met. This is necessary when products are imported from the EU to the UK.
Special case Northern Ireland
From both a VAT and customs perspective, Northern Ireland is the great exception.
In order not to negatively affect trade between the Republic of Ireland and Northern Ireland, the so-called Northern Ireland Protocol was included in the Brexit agreement.
The Protocol on Northern Ireland is a contractual clause of the Brexit withdrawal agreement between the United Kingdom and the European Union. It concerns the internal border between the Republic of Ireland and Northern Ireland, which is part of the United Kingdom, and is intended in particular to prevent stationary border controls from taking place at this border and generally not to negatively influence trade between the two countries.
Northern Ireland is part of the customs territory of the United Kingdom, when it comes to customs, Northern Ireland is treated as a member state of the EU. This means when selling from an EU country to Northern Ireland for example, this is treated just like any sales between EU member states.
This means that supplies from an EU Member State to Northern Ireland will continue to be assessed as either:
- Tax-exempt intra-Community supply – if the supplier has a valid VAT ID
- Or as a mail order supply, where the place of supply depends on whether the UK VAT registration threshold (£70,000) has been exceeded or waived.
NOTE: It is necessary to deliver the product sold directly (to Northern Ireland). Once the product sold lands in the UK for onward delivery to Northern Ireland, the EEA has been exited and the customs arrangements also change as the product.
Product approvals in Northern Ireland
The Northern Ireland Protocol to the Brexit agreement provides that Northern Ireland will remain part of the EU single market. The new regulations on UKCA marking therefore do not apply to Northern Ireland. The CE mark can continue to be used for the Northern Ireland market.
Sellers from the EU should always think about the following aspects before deciding how to pursue with selling into the UK:
- UK VAT status of the customer
- Location of the customer
- Value of the goods being sold (value of the cart)
- Location of the goods being sold
- Proper marking and labeling
Brexit and E-Commerce: Changes for EFN and Pan-EU sellers in the UK
Amazon announced last December some big changes for FBA sellers using EFN or Pan-EU in the United Kingdom. The FBA operations of the mail-order giant are now – because of Brexit – divided into European and UK services. The European Fulfilment Network in the UK came to an end as well as the inventory transfers for Pan-European FBA between the EU and the UK.
What is Amazon’s European Fulfilment Network?
The European Fulfilment Network (EFN) allows FBA sellers to store their inventory in one of Amazon’s local Fulfilment Centres across Europe and fulfil all orders coming from all 5 European marketplaces from the same local inventory pool.
European-Fulfilment Network (EFN)
The European Fulfilment Network (EFN)allows you to fulfil orders from any Amazon European marketplace, while you ship your goods to Amazon’s fulfilment centres in just one country such as the UK.
Since 1 January 2021, goods of EFN sellers storing in the UK are only used for national order and no longer to fulfil orders from other EU marketplaces. This does not only mean a decrease of 446 million to 66 million potential customers, further having only one VAT ID is often no longer enough as storing in a country always make a VAT registration mandatory.
Amazon FBA and Brexit: Pan-European FBA (Pan-EU)
When using Pan-European FBA, you usually send your stock to a certain warehouse and Amazon distributes the goods for storage in the European countries you are storing in – always depending on the respective demand.
Since 1 January 2021, there are no inventory transfers between the UK and the EU anymore. This means that you need to have you inventory in the UK and in the EU or you decide for only one of those options, but from 1 January 2021 this won’t be a combined FBA fulfillment solution anymore.
Pan-European FBA (Pan-EU)
Pan-European Fulfilment by Amazon (Pan-EU) is a fulfilment option for Amazon sellers using FBA and allows storing in all warehousing locations in Europe and sell your products from there as well. This mean storage in up to 7 countries, ensuring the fastest delivery times and the lowest fulfilment fees.
How to continue selling in Europe?
Sellers based in mainland Europe have to handle their stock in a similar way. Either they mainly sell within the EU and store their inventory in Amazon warehouses in Germany, France, Spain, Italy, Poland and/or the Czech Republic or they also store in UK for the purpose of selling there.
Seller from outside the EU also need to split their stock if they want to sell in the UK and in the EU.
What changes for Pan-EU sellers?
To continue selling with Pan-EU, the only difference is that goods are to be stored in the UK and in the EU – not only in one of those countries. With the latest adjustments of the fees for fulfillment, Amazon Pan-EU is still very likely to be the most profitable FBA method for many Amazon sellers.
You are still not sure if Pan-EU is worth it?
>>Here<< you find a calculator to find the best FBA service for your online business.
Amazon’s FBA Brexit announcement
In regards to the Brexit and how it will affect Amazon sellers in Europe, Amazon has stated the following:
[…]”The UK is due to formally leave the EU’s Single Market and Customs Union from January 1, 2021.
While UK-EU negotiations are ongoing (including determining what tariffs, if any, will apply), from January 1, 2021 there will be a customs border between the UK and EU which will have an impact on businesses working across this border.
This will have the following impact for Amazon Selling Partners from January 1, 2021:
- FBA offers using EFN will not be fulfilled across the UK-EU border.
- Pan-European FBA inventory transfers will stop between the UK and EU (however, Pan-European FBA will continue to transfer inventory within the EU region, supporting your sales on Germany, France, Italy and Spain sites)
- To mitigate the impact of these changes, you should consider splitting your inventory and sending it to a fulfilment centre in the UK and the EU, so that you have sufficient stock either side of the new customs border
- This may require you to ship your products across the new UK-EU customs border and provide additional information as part of a customs declaration
Your Amazon business will continue to operate as usual until January 1, 2021. However, there are actions you can start taking now to prepare your business for the new customs borders. For information about how you can prepare for these changes, and for all of the latest information about Brexit, please see our BREXIT guidance help pages and the UK government website.
Thank you for selling on Amazon. We remain committed to supporting your business selling in the UK and in the EU as we make this transition, and we will continue to provide the latest information to support you and help your business thrive in the future.”
Does it make sense to continue selling in the UK?
When asked if it is worth continuing to sell online in and from the UK, our answer is a resounding YES!
While marketplaces have taken a long time to inform traders about the changes regarding Brexit and many traders are still holding their feet still, now is an ideal time to sell (again) on Amazon.uk.
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It is possible to comply with VAT and customs requirements. Much was unclear, but most questions, at least when it comes to VAT and customs clearance, have been answered. Now it’s a matter of meeting all the requirements as quickly as possible, ensuring compliance and selling goods again as soon as possible!