The exit of UK from the EU has affected the trade across the borders. Many small businesses are facing challenges while importing or exporting goods. The online sellers are worried about implementing the changes and are still not sure how to account for changes especially when it comes to VAT. HMRC has advised that seeking an advise from an expert such as freight forwarder should be considered , however for the implementation of changes in the VAT you might need to get some professional advice from an accountant, you can contact accountants in Croydon, Surrey for advice.
Will the changes apply to me?
The changes will apply to you if you
- Export goods to EU or non-EU countries
- Import goods from EU or non-EU countries
- Export or import goods to Northern Ireland
The Changes
All Sales to the EU countries and non-EU countries will be consider as Exports and according to HMRC guidance they will be considered as zero rated for VAT purposes.
If you are selling through an online marketplace such as Amazon, E bay or Shopify, these online market places will start collecting VAT and transfer to HMRC if either of the following apples:
- When the sale is made from outside the UK to the UK customer with a value of up to £ 135
- Delivered to the UK customer from the UK, however the business is not UK based.
How will VAT be accounted for in the books after Brexit
Scenario 1: An online business which is based in the UK , sells an item for £ 12 and the sale is made from EU to GB through amazon and the marketplace (for example amazon ) was responsible for collecting VAT.
If the customer was charged £12 for the order, £10 will be paid to the seller and £2 VAT will be held by the amazon to be transferred to HMRC.
Seller will not be responsible for any VAT they will just record the net amount of £10 in their books.
Scenario 2: An online business based in the UK made its sale from GB to EU , if the customer is charged £12 for the order , all of the £12 will be paid to the seller, the seller will record the sale of £12 as zero rated- VAT will be payable to the EU country and calculated separately and accounting for according to the rules of that EU country.
In short, Sales from the overseas seller where the goods are already in the UK at the point of sale, the online marketplace such as amazon will be responsible for the VAT collection on the behalf of HMRC.
If the value of the goods supplied is not exceeding £135 like in the above example and the goods were outside the UK at the point of sale and are supplied to the VAT registered business in the UK a VAT reverse charge will be applied.
In this case the UK VAT registered customer will account for the VAT by means of the VAT reverse charge procedure. These VAT registered business will account for this VAT in their VAT return and will be able to recover this VAT as input tax according to normal VAT rules.
We at Taxaccolega have an expert team of affordable accountants based in Croydon and South hall who can advise you on the changes that you need to apply with regards to VAT after Brexit. You can call us at 020 8127 0728 or drop us a message here and we will get back to you.
Sources: https://linkmybooks.com/blog/uk-post-brexit-vat-for-amazon-and-ebay-e-commerce-sellers, https://www.gov.uk/government/publications/changes-to-vat-treatment-of-overseas-goods-sold-to-customers