The UK-EU trade deal means businesses can no longer trade freely under the previous EU VAT and customs agreements, and new taxes and rules apply.
This might affect your business if you
• import/export goods or services to the EU
• send items through the post
• sell online goods that cost £135 and under
If you import goods from the EU, talk to your suppliers and make sure they’re set up correctly for UK tax. Under the new rules, EU sellers should be charging UK VAT at the point of sale, rather than HMRC collecting tax when the goods are imported into the country. This means that EU businesses wanting to trade with the UK need to register with HMRC.
How much tax you need to pay depends on the cost of the order. If this isn’t included in the sale price, it’ll be due on delivery.
• for goods up to £135– the VAT rate can be between 0 and 20 per cent depending on the item
• for goods over £135– these are subject to a 0 to 25 per cent import duty, plus UK VAT (usually 20 per cent), which again should be charged when you’re buying the item
The good news is you can pass the VAT costs on to the end user (your customer) by way of reverse charge when you buy from a seller in the EU. This only applies to goods you’re buying to then sell on in the UK, rather than to equipment or items you need to run your business for example.
To use the VAT reverse charge:
• you need to be VAT registered
• the EU company you’re buying from needs to be registered with HMRC
• you need to tell the EU seller your VAT number when you buy the goods
Delaying customs duty on imports
Customs payments can be delayed until 30 June 2021. If you need to regularly import goods as part of your business, you can choose to pay your customs charges monthly.
And what about customs duty on exports?
As well as VAT, you’ll also need to pay customs duty on items you send outside of the UK.
Additional paperwork and courier fees
There is additional paperwork and fees when importing and exporting goods:
EORI number– if you move goods between Great Britain and the EU you’ll need an EORI number that starts with GB. If you export or import goods to Northern Ireland you’ll need a number that starts with XI.
Courier fees– some couriers are charging an additional fee to those buying from EU retailers to cover the additional admin efforts when VAT isn’t applied by the seller.
Licences and certificates– there are rules around importing certain goods where you’ll need a certificate, for example a £150 health certificate for food deliveries.
Sending items through the post– you’ll need to complete a customs declaration form if you’re sending goods to customers outside the UK.
Seeking additional insights? Cangaf Ltd is here to assist. Contact us now for a free quote, and we’ll address your accounting concerns promptly!