VAT nightmare incoming

[VMA131Marine]

11 hours ago, Duncan B said:

From my point of view this is a good thing as it will level the playing field for home based online retailers, if it is able to be enforced and that is a big IF.

Enforcement will be straightforward through customs checks. What it will do is make some products absolutely unavailable to U.K. modellers unless they physically go outside the country to buy them.

[VMA131Marine]

23 hours ago, bentwaters81tfw said:

That looks more like a Party Political broadcast.

The word 'Bargepole' comes to mind.

 

That is all the comment you will get from me.

What a fascinating and baffling comment. You can read about the changes for yourself:

 

Outline of the changes

For imports of goods from outside the UK in consignments not exceeding £135 in value (which aligns with the threshold for customs duty liability), we will be moving the point at which VAT is collected from the point of importation to the point of sale. This will mean that UK supply VAT, rather than import VAT, will be due on these consignments.

The new arrangements will also involve the abolition of Low Value Consignment Relief, which relieves import VAT on consignments of goods valued at £15 or less.

Online marketplaces (OMPs), where they are involved in facilitating the sale, will be responsible for collecting and accounting for the VAT.

For goods sent from overseas and sold directly to UK consumers without OMP involvement, the overseas seller will be required to register and account for the VAT to HMRC.

Business to business sales not exceeding £135 in value will also be subject to the new rules. However, where the business customer is VAT registered in the UK and provides its valid VAT registration number to the seller, the VAT will be accounted for by the customer by means of a reverse charge.”

https://www.gov.uk/government/publications/changes-to-vat-treatment-of-overseas-goods-sold-to-customers-from-1-january-2021/changes-to-vat-treatment-of-overseas-goods-sold-to-customers-from-1-january-2021

[bentwaters81tfw]

20 minutes ago, VMA131Marine said:

What a fascinating and baffling comment. You can read about the changes for yourself:

 

Outline of the changes

For imports of goods from outside the UK in consignments not exceeding £135 in value (which aligns with the threshold for customs duty liability), we will be moving the point at which VAT is collected from the point of importation to the point of sale. This will mean that UK supply VAT, rather than import VAT, will be due on these consignments.

The new arrangements will also involve the abolition of Low Value Consignment Relief, which relieves import VAT on consignments of goods valued at £15 or less.

Online marketplaces (OMPs), where they are involved in facilitating the sale, will be responsible for collecting and accounting for the VAT.

For goods sent from overseas and sold directly to UK consumers without OMP involvement, the overseas seller will be required to register and account for the VAT to HMRC.

Business to business sales not exceeding £135 in value will also be subject to the new rules. However, where the business customer is VAT registered in the UK and provides its valid VAT registration number to the seller, the VAT will be accounted for by the customer by means of a reverse charge.”

https://www.gov.uk/government/publications/changes-to-vat-treatment-of-overseas-goods-sold-to-customers-from-1-january-2021/changes-to-vat-treatment-of-overseas-goods-sold-to-customers-from-1-january-2021

I read the original post by Shatner, then the ones below it - hence my comment! I am familiar with the concept, I worked in international freight forwarding for 25 years.

[VMA131Marine]

1 hour ago, bentwaters81tfw said:

I read the original post by Shatner, then the ones below it - hence my comment! I am familiar with the concept, I worked in international freight forwarding for 25 years.

And, instead of using that knowledge and experience to help us understand the impact of this change you decided snark was the way to go. Noted!

[roym]

I can't wait to see how UK customs are going to track your kits when they'll have 7000 trucks to go through.

A day. 

And another 7000 tomorrow.

And another 7000 the day after that. 

 

Aside that, in a past life I was involved in selling a niche product/service into the UK, as well as worldwide. If I still was and had to deal with this kind of red tape I just wouldn't bother. And I'm nowhere near as well off as Shatner..... I can't see the likes of Eduard, Special Hobby or other small (but significant to us modellers) companies continuing to do so either. To be fair though,  I think this will be the least of your problems come the new year. 

[JeffreyK]

Very worrying and totally confusing. Just spent some time reading through it all and it's all but clear.

The VAT registration form is mainly tailored only to UK based companies and there's absolutely nothing on how the process is supposed to work in practice. How does HMRC collect the VAT from me in Japan? How will customs declarations on the parcels look like so UK Customs would know VAT is collected?

 

In the HMRC article linked above contains a paragraph "Direct sellers - businesses making sales direct to GB customers rather than via an OMP" in there is a link to another article "Overseas business selling goods in the UK" which all but contradicts the first article in saying that you are only liable to charge VAT if your UK sales exceed the threshold of £70.000 annual turnover. 

 

There is a paragraph in there that says that non-business sales (consumer to consumer) and gifts aren't subject to this new rule. So will the VAT collection for those instances continue to be at the recipient's end?

 

There are potential advantages: 

VAT will be calculated only on the sales price of the goods, postage, packing and other transportation costs are excluded. Also, this would eliminate the VAT and customs "handling charge" by RM and Parcel Force. Unless of course they come up with a new "verification fee" or something like that...

 

I hope this all can be cleared up quite soon, otherwise I'll have to stop selling directly to the UK.

 

Jeffrey

[VMA131Marine]

4 hours ago, roym said:

And I'm nowhere near as well off as Shatner

No matter how well off someone is, nobody goes into business to lose money .... well, not deliberately anyway.

[JeffreyK]

Perhaps @Mike Mods can merge the two threads on the subject?

It's a very important subject and any help and info on trying to get to the bottom of it is greatly appreciated.

J

[KevinK]

13 hours ago, MikeR said:

These rules also bring us into line with what the US and Australia do as well.

Not the US I live in!

 

There has been no charge on any package coming to me from outside the US: we have (from memory) an $800 / package exemption for import duty. I'm a pretty keen modeller but even I have yet to approach that! What we don't have is VAT, just the state sales taxes and there isn't really a practical way for each state to reach out internationally. However, many states have imposed their sales taxes on US traders selling into them from other states, but in real-life practice this only applies to the 'big boys'. So, if I buy from Amazon, they collect WA sales tax on the order, but if I buy from a small retailer in, say Georgia, they don't.

 

A disturbing thing about the HMRC action is that it looks to be a tax collector failing to do its job and simply putting the monkey on someone else's back. The reason there have always been exemptions for small values and small turnovers was because it was uneconomic to collect small sums: now, HMRC has apparently no cost because they transfer the burden to an overseas retailer, who, as several posters have said, may well just eliminate UK sales. While this may be a short-term benefit for UK retailers, in the long run this may have the effect of depressing everybody's trade when all countries do it. Isn't this somewhat similar to what happened in the '30s when so many countries imposed punitive duties and depressed international trade?

13 hours ago, MikeR said:

These rules also bring us into line with what the US and Australia do as well.

 

Edited October 18, 2020 by KevinK
Double post - I blame the new forum software, and me!

[Mick4350]

You know it sounds like the new trade envoy from Australia Tony Abbott has suggested that the Brits should get the " Gerry Harvey " tax as well as to boost profits into the British Government coffers by taxing everything that comes from offshore. This may be in real can of worms, so that's enough from me. 

[Tim R-T-C]

I suspect this whole operation is a desperate attempt to reduce the burden on the post office who, overnight, are going to have to start checking VAT due on an infinitely increased number of deliveries as all EU packages suddenly become tax eligible.

 

 This means many more packages stopped and grey cards sent out, so lots more work for all levels of Royal Mail.

 

I would imagine that under pressure, they will allow small business sales without VAT collection, but that this means packages will be stopped for processing and payment collection, with warnings of long delays.

[Greg B]

Australia brought this in a few years ago. All it means is that when I order from eBay, HLJ etc, the % for GST (VAT) is added on and the rest is between the retailer and the taxman. The taxman gets his cut, you get your kit, you just decide whether with postage and time it’s still advantageous to you to order from abroad compared to domestically. That will therefore be primarily down to the importer/distributor.
 

If the importer/distributor in UK/Aus are still over the price that I can get a kit/tool delivered (with their advantage of bulk shipping) then the move of consumers to buying from abroad will carry on until they realise that the habit of adding on a hefty % because they are a sole source for a brand is a dead business model and that to survive they will need to become competitive. The prime example I would say is the perennial favourite of Hasegawa pricing. Distance from Japan to Aus or Uk is pretty similar, but I can grab a Hasegawa kit here in AUD$ for around the same numerical value as I would pay in £ in UK. Current rate is about AUD$1.8 to £1. That % indicates that there is some fat in there that can be trimmed. Personally I feel for the model shops/sellers who are stuck with the mark up from the importer/distributor. They are between that rock and a hard place.

 

[JeffreyK]

56 minutes ago, Tim R-T-C said:

I suspect this whole operation is a desperate attempt to reduce the burden on the post office who, overnight, are going to have to start checking VAT due on an infinitely increased number of deliveries as all EU packages suddenly become tax eligible.

 

 This means many more packages stopped and grey cards sent out, so lots more work for all levels of Royal Mail.

 

I would imagine that under pressure, they will allow small business sales without VAT collection, but that this means packages will be stopped for processing and payment collection, with warnings of long delays.

 

But EU shops already charge VAT on all sales, unless they plan to stop that for sales to the UK after Brexit?

[Graham Boak]

10 minutes ago, JeffreyK said:

 

But EU shops already charge VAT on all sales, unless they plan to stop that for sales to the UK after Brexit?

The EU are not going to collect tax for the UK government, so it will be like all visitors from non-EU countries, in that for major buys the VAT is refunded upon application.  Or not applied - see Hannants offering VAT or no-VAT sales.  So the situation will be as now, just the UK will be in a different category.

[Vlamgat9]

12 hours ago, VMA131Marine said:

Enforcement will be straightforward through customs checks. What it will do is make some products absolutely unavailable to U.K. modellers unless they physically go outside the country to buy them.

This is my fear.

There’s no way all the cottage industry decal makers etc in eg Brazil are going to register for UK vat. It’s just no going to happen,

[JeffreyK]

2 minutes ago, Vlamgat9 said:

This is my fear.

There’s no way all the cottage industry decal makers etc in eg Brazil are going to register for UK vat. It’s just no going to happen,

Especially if they don't make the application form a bit more unambiguous and also offer it in different languages. Also, as I said in the other thread on this, there's absolutely no indication or explanation how this is supposed to work in practice. I.e. how would the tax make its way from the seller somewhere in the world to HMRC? And how would UK customs know that an incoming parcel has UK VAT paid on it? Would all postal services around the world need to make separate forms or stickers and how would this be policed??

J

[Robert]

So would VAT be charged on the total purchase including postage and packing ?

 

Regards

Robert

[JeffreyK]

15 minutes ago, Robert said:

So would VAT be charged on the total purchase including postage and packing ?

 

Regards

Robert

No, the article says the product price only. That’s an advantage.

J

[Nigel Bunker]

I notice thisw only comes into force from 1st January 2021 so I shall be topping up my stash before that date to avoid these problems.

[Troy Smith]

16 hours ago, VMA131Marine said:

but my recollection is that gifts aren’t exempt from VAT either.

Higher threshold, was £35 IIRC.

I was wondering if was to catch all the cheap bits that are China listed eBay sales, but many of those l think are ordered and bulk shipped in, then split up and mailed in the UK.

 

As an aside,I think it was in an old model mag, I read the VAT limit was £15 then,  and it was never increased.  Obviously £15 in 1975 was quite.a long of cash, I'll have to look up the equivalent today...

[Black Knight]

2 minutes ago, Troy Smith said:

 

. . . As an aside,I think it was in an old model mag, I read the VAT limit was £15 then,  and it was never increased.  Obviously £15 in 1975 was quite.a long of cash, I'll have to look up the equivalent today...

In 1975 my pay was £22.50 per week and that was a decent wage

So maybe about £500 today? Then £15 might be about £300?

[davecov]

Mods, can we have this thread merged with a pre-existing one - https://www.britmodeller.com/forums/index.php?/topic/235081795-vat-nightmare-incoming/

 

Dave

[Julien]

On 16/10/2020 at 22:54, alt-92 said:

Slow news day I guess?

 

From this summer's FT:

"UK set to force websites to collect overseas sales VAT

HM Revenue & Customs reveals plan to combat tax fraud in leaked document"

https://www.ft.com/content/d9baad71-f447-43ac-bca4-2f93e8127811

Please dont post links to sites behind paywalls

[alt-92]

Point taken, must have been a freebie article then for me.

[Julien]

18 hours ago, VMA131Marine said:

And, instead of using that knowledge and experience to help us understand the impact of this change you decided snark was the way to go. Noted!

I read the comments and I saw no indication of a snark anywhere?