Jump to content

VAT nightmare incoming


Recommended Posts

1 hour ago, Model Monkey said:

Getting parcels into the UK is not "business as usual" for overseas vendors.

 

 

If you're referring to my post, I was specifically addressing Hannant's bleating about not being able to send anything from the UK to Europe, which is patent nonsense.

 

 

Link to post
Share on other sites

My apologies.

 

We're very frustrated with the situation.  We hugely value our UK customers and any disruption causes us great angst.

Link to post
Share on other sites
18 hours ago, Model Monkey said:

Getting parcels into the UK is not "business as usual" for overseas vendors.

 

 

I am very sympathetic to your position and can appreciate why you would not sell into the UK. I bought something from you in 2020 and I'm glad I did so before the new rules came into effect.

 

However, is your comment in relation to the theoretical proposition of getting parcels into the UK under the new rules, or the result of practical experience? I've been ordering pretty much as usual from all over the world, and aside from COVID-related delays, have received all my parcels from Europe, Asia and Russia without disruption, and in about 75% of cases by vendors who have not signed up for the VAT scheme. I certainly understand that that is a risky position, but current practical experience would seem to indicate that parcels are arriving and being delivered without any problem. How long that will last is anyone's guess.

 

My overseas Ebay purchases have included VAT levied by Ebay. What I find interesting is that (as far as I can tell) these parcels have no indication on them that VAT has been paid or that it is an Ebay purchase. I have no idea how RM would know VAT was paid from an external inspection of the package.

 

Jon

Link to post
Share on other sites
6 hours ago, Jon Bryon said:

 

...is your comment in relation to the theoretical proposition of getting parcels into the UK under the new rules, or the result of practical experience?...

 

Jon

Hi Jon and thanks for your patronage!

 

The answer is both.  UK customers are routinely reporting that HMRC/Border Force is not yet enforcing the new rules.  Packages we shipped to customers in the UK before we were made aware of the new rules were delivered to UK customers, often with no VAT collection made.  We are grateful that the packages were delivered despite our ignorance.

 

At this point, we're just not sure how best to proceed.

 

Presently, eBay is a workable, but flawed and expensive, option because there are still some risks associated with using eBay as a VAT collection agent.  In addition to a higher product cost for the customer to cover eBay's fees, the most important unresolved eBay issue for us as the vendor is package marking, as you astutely pointed out with your own experience.  How do we as a vendor mark the package reporting that eBay did collect VAT in a way that HMRC would accept thus satisfying HMRC requirements?  Because that question has yet to be answered by eBay or anybody else, as of this writing we don't know how to mark the package and therefore cannot properly mark the package.  The risk for the customer is that when HMRC begins enforcing the new requirements, without an acceptable marking HMRC has no ability to confirm the customer actually paid VAT to eBay.  So, HMRC could require the customer to pay VAT again upon receipt before releasing the package to the UK customer.  VAT package marking must be solved for eBay to work well.

 

In addition to the risk that Border Force may at any time begin enforcing the new rules, seize a package and destroy it, or return it to us along with a stiff fine, we have to consider some very real legal risks associated with shipping to the UK under the new rules (and later to the EU).  We have been advised that legal risks do exist for both us and the UK customer, however small.  Although not likely to happen, there is a legal "worst case scenario" that we all ought to carefully consider.  Border Force could, as we say on this side of the pond, "play hard ball" and declare that the VAT-less package sent to the UK constitutes an illegal import activity triggering criminal, legal action against us and the UK customer.  The colloquial term for illegal import activity is "smuggling".  As many UK customers know, Value Added Tax is governed by the Value Added Tax Act 1994, an act of Parliament (Westminster).  Section 15 to Section 17 of this statute details the charge to the tax applicable in the case of ‘Imported Goods from Outside Member States’ (i.e., outside the UK after Brexit).  Click the link below to see the severe penalties for UK customers found in violation of the Act, including incarceration and big fines.

https://www.legislation.gov.uk/ukpga/1994/23/section/72

 

If Border Force reports the illegal import activity to US Federal law enforcement for investigation and prosecution on this side of the pond, we in the US are also subject to severe penalties.  US Federal law enforcement authorities could also "play hard ball" and view the erroneous package markings (erroneous customs declaration label) and failure to collect VAT as an unlawful export activity.  That offense is a serious crime here in the US, punishable by up to 5 years imprisonment, a $10,000 fine for each offense, and forfeiture of my business which is also our family's home (see 13 United States Code § 305 - unlawful export information activities).  Link: https://www.law.cornell.edu/uscode/text/13/305#:~:text=Any person who knowingly fails,more than 5 years%2C or

 

This means that the UK customer could face stiff penalties for unlawful import activities and we could face serious penalties for unlawful export activities.

 

We have been advised that the risk for such legal action on either side of the pond is very, very low, yet that risk does exist and people do get prosecuted.  Some vendors may choose to accept that risk.  We prefer not to.

  • Like 2
Link to post
Share on other sites

Don't know if this is relevant..

Just received an order from Flying Leathernecks.

$52 order

$14 shipping

12 days from point of order to Aberdeen.

And as an aside some of the best aftermarket parts I've seen

Link to post
Share on other sites

Not directly relevant to the VAT issue, but recently sent a parcel to our son who is student in Germany. Pre-31 December, these took about a week to arrive. There should be no VAT issue as all second hand goods for personal use. Arrived at customs in Germany on 3 February, cleared customs 20 March, so over six weeks in customs, still waiting for delivery.

 

Paul

  • Thanks 1
Link to post
Share on other sites
On 3/18/2021 at 9:15 PM, Model Monkey said:

Getting parcels into the UK is not "business as usual" for overseas vendors.

 

As has been said throughout this thread, previously, VAT was collected from the customer in the UK by UK officials, typically with the buyer having to pay VAT and a Royal Mail handling fee to Royal Mail in order to release the package from Customs.  That was "business as usual".  The new WTO rules push the VAT tax collection and reporting burden to the online retailer in the U.S. who is exporting the product to the UK.  That is a new, big and costly burden for the non-UK vendor.  Allow me to explain.

 

Under the new rules, we, as a US vendor, are required to register for a VAT number and EORI code (Economic Operator Registration and Identification) from HM Revenue and Customs (HMRC) in order to deliver e-commerce orders into the UK.   Sounds rather simple, but actually, it's a mess.

 

EORI number application requires our UK VAT number, our UK national insurance number, our UK taxpayer reference and UK Government Gateway ID code.  So we need a VAT number to apply for an EORI code but we need an EORI code to apply for a VAT number. Catch-22.

 

We'll need the EORI code when we supply information to customs authorities, for example when completing customs declarations. We have been informed that an EORI number application requires:
- our UK VAT number
- our UK national insurance number (which we don't have because we don't have UK insurance)
- our UK taxpayer reference (which we don't have because we are not a UK taxpayer)
- UK Government Gateway ID code.

 

See some big problems here?

After receiving a VAT number and EORI code from HMRC, we will be required to collect all VAT fees from our UK buyers at checkout, presently set at 20% of the sales cost including the shipping cost (20% for HS Code 950320 "scale models"), then forward those taxes to HMRC quarterly.   We would also be required to pay any transaction fees and currency conversion fees associated with the electronic transfer of collected VAT to the UK government.  These are new business costs.

Additionally, the new rules require us to make our company's financial records available to UK government inspection upon demand, in an accounting format consistent with UK accounting practices.  Our business records are in a US accounting format to satisfy US taxation authorities' requirements.  We are unfamiliar with UK accounting practices and terminology and it is unlikely that our records are consistent with UK accounting norms.  We would have to quickly become familiar with UK accounting norms then evaluate our records to see if they will meet UK requirements.  If our records are found not to be consistent, we would have to create and maintain two sets of records, one acceptable to our own US taxation authorities meeting their standards, and another set of records in a format that will satisfy HMRC requirements.  HMRC recommends that we hire a UK-based tax attorney or representative to handle this for us.  I'm sure UK attorneys are not free or inexpensive.  This is a big, new administrative and financial burden, not at all "business as usual".

Unfortunately, as a small vendor, we are not staffed or resourced to comply with these new administrative requirements and financial burdens.

Because of the Catch-22 VAT and EORI requirements, we are not approved to collect VAT by HMRC because we can't satisfy the VAT/EORI application and collection requirements.  Furthermore, although we can certainly send a package to customers in the UK as though we were conducting "business as usual", we don't know if Border Force will permit the package to enter the UK or what Border Force might do with it once it arrives.  Depending on which HMRC official we ask, the package could be returned to us at our expense plus a fine levied against us for unlawful import activities, or the customer's models could be seized then destroyed by Border Force.  Presently, customers are reporting that HMRC is not yet enforcing the new requirements and their packages are being delivered by Royal Mail as they had been in the past.  We've been told that when HMRC/Border Force begins enforcing the requirements (without notice), the packages will not be delivered to UK customers since we, the US vendor, do not meet HMRC's collection and reporting requirements.  The package will either be returned to us with fine or destroyed.

 

 

First of all, you don't need an EORI number to apply for a UK VAT number or a HMRC Government Gateway account. I actually had an existing account from my time living in the UK, however I found that I was not able to use if for VAT purposes and had to create a new one, with my now relevant details here in Japan and that was very straight forward. The application form for VAT is admittedly very lengthy and after submitting I received another long questionnaire in reply as I'm a non-UK applicant and as such a few mroe details were required. After that I received my VAT number within I think 10 days.

 

Secondly, an EORI number is a business identifier when you import and export goods across borders and you, the company are responsible for the shipping, such as you have a container load of kits made in China and have them shipped to yourself or a distributor in another country, However, when sending things by post things change. The postal service is your shipping agent and bears the responsibility for the shipping. For postal deliveries across borders no EORI number is needed. You can put it onto the label and it doesn't hurt, but as far as my research into this matter went, it is NOT required.

As my contributions in this thread show, getting the correct information from HMRC's customer support agents is far from easy, a path littered with land mines of false information.

When you dealt with HMRC have you made it abundantly clear that you are a small business with a low turnover, selling low-value items directly to UK customers and that you do this by bog standard postal service, not by a shipping agent or forwarder etc. and that it's small parcels, not container loads of stuff?

 

I'm a bit anxious as well how things will develop over time if and when UK customs start to mean business and not look the other way but things are kind of working OK so far....

 

Cheers,

Jeffrey

  • Like 2
Link to post
Share on other sites
4 minutes ago, JeffreyK said:

......The application form for VAT is admittedly very lengthy and after submitting I received another long questionnaire in reply as I'm a non-UK applicant and as such a few mroe details were required. After that I received my VAT number within I think 10 days.

Would that mean you only have to do that laborious form filling once?  After that, you just fill in a normal customs chit and the relevant code/number and contents?

 

Mike

Link to post
Share on other sites
1 hour ago, JeffreyK said:

 

First of all, you don't need an EORI number to apply for a UK VAT number or a HMRC Government Gateway account. I actually had an existing account from my time living in the UK, however I found that I was not able to use if for VAT purposes and had to create a new one, with my now relevant details here in Japan and that was very straight forward. The application form for VAT is admittedly very lengthy and after submitting I received another long questionnaire in reply as I'm a non-UK applicant and as such a few mroe details were required. After that I received my VAT number within I think 10 days.

 

Secondly, an EORI number is a business identifier when you import and export goods across borders and you, the company are responsible for the shipping, such as you have a container load of kits made in China and have them shipped to yourself or a distributor in another country, However, when sending things by post things change. The postal service is your shipping agent and bears the responsibility for the shipping. For postal deliveries across borders no EORI number is needed. You can put it onto the label and it doesn't hurt, but as far as my research into this matter went, it is NOT required.

As my contributions in this thread show, getting the correct information from HMRC's customer support agents is far from easy, a path littered with land mines of false information.

When you dealt with HMRC have you made it abundantly clear that you are a small business with a low turnover, selling low-value items directly to UK customers and that you do this by bog standard postal service, not by a shipping agent or forwarder etc. and that it's small parcels, not container loads of stuff?

 

I'm a bit anxious as well how things will develop over time if and when UK customs start to mean business and not look the other way but things are kind of working OK so far....

 

Cheers,

Jeffrey

 

Hi Jeffrey, yes, the process is, as you aptly stated, "littered with land mines of false information".  Information is changing and many HMRC websites are outdated, further confusing vendors trying to export.  Even UK small businesses are stuck and confused as they try to export.  See: https://www.theguardian.com/business/2021/jan/26/an-absolute-killer-small-uk-firms-struggle-with-brexit-vat-rules

 

It would seem that I had a very different experience applying for a VAT number than you did, Jeffrey.  When I applied for a VAT number using HMRC's automated VAT application website, I specifically identified myself as a small US-based vendor.  During the process, I was explicitly asked for my EORI number which I had to provide before I could proceed with the next step in the application process.  Without an EORI number, I was stuck.  That's when I contacted HMRC personnel by telephone, asking for clarification.  After a surprisingly short wait to reach an actual human, the staffer I spoke to told me that I didn't need a VAT number because I didn't "store goods in the UK before they were sold to UK customers".  What he told me was consistent with this, possibly outdated, HMRC website: https://www.gov.uk/guidance/vat-overseas-businesses-using-an-online-marketplace-to-sell-goods-in-the-uk 

 

But he also cautioned me that this information "may change".  He explained that the situation was developing and that details were not yet finalized, but that his understanding was that US vendors would not need a VAT or EORI number.  If I wanted to obtain a VAT number, the VAT application website should let me proceed with the process without supplying an EORI number.  Except that it didn't.

 

What he told me was explicitly inconsistent with this HMRC official announcement and summary of changes: 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

 

That HMRC website explicitly states: "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."

 

So I spoke to another HMRC representative the next day.  That second representative stated the first representative was partly correct in that the situation was indeed developing.  But he said that the first representative was wrong about US vendors not needing a VAT number.  He stated that US vendors absolutely needed a VAT number under the new rules in order for that vendor to import goods into the UK, even if the goods were not stored in the UK before being sold to a UK customer.  When I explained that the application process required me to provide an EORI number and UK insurance code, he was unsure whether I would need them or not.  He suggested that the website may be out of date but assured me that if so, it would be updated.  He couldn't tell me how to get past the Catch-22 VAT/EORI problem with the application website. He further stated "we, ourselves, have not received detailed guidance", "websites were in the process of being updated", and "keep trying".

 

It would seem that HMRC staff are as frustrated as the rest of us.  Both reps I spoke to were very professional, courteous and apologetic over their inability to provide better help and more certain information.

 

I continued to try to apply online, answering questions differently in hopes of finding the right combination of answers that would result in a successful VAT application submission but failed at every attempt.  Very frustrated, I called HMRC again the next day and gratefully was able to speak to yet another human.  I did make it, in your words, "abundantly clear that [I am] a small [US-based] business with a low turnover, selling low-value items directly to UK customers and that [we] do this by bog standard postal service, not by a shipping agent or forwarder etc. and that it's small parcels, not container loads of stuff".  I described to all three representatives that I was trying to import scale models, HS Code 950320, valued at less than £135 GBP, one small 8 ounce box at a time, to individual UK customers one customer at a time, via the US postal service to Royal Mail with most shipments costing about £12 GBP in postage.  The third rep advised me to hire an agent in the UK to handle the process for me.

 

That's when I suspended selling to UK customers, temporarily I hope.  I am not alone.

 

Clearly, the truth is out there but it can't yet be found at HMRC.  I'm sure at some point this will all get sorted out.  I'll try the website again.  Hopefully, some changes have been made and I'll either be told with certainty that no VAT number and/or EORI code is needed, or the process will result in a successful submission.

 

The good news is that packages I shipped to UK customers after the new rules went into effect did in fact arrive, and relatively quickly.

Link to post
Share on other sites

Just a small point Steve, certain elements of the UK 'media' have an axe to grind re Brexit. I would respond to their copy by buying shares in a salt mine.

  • Like 1
  • Haha 2
Link to post
Share on other sites
13 minutes ago, bentwaters81tfw said:

Just a small point Steve, certain elements of the UK 'media' have an axe to grind re Brexit. I would respond to their copy by buying shares in a salt mine.

My nephrologist would disagree

Link to post
Share on other sites
4 hours ago, vildebeest said:

Not directly relevant to the VAT issue, but recently sent a parcel to our son who is student in Germany. Pre-31 December, these took about a week to arrive. There should be no VAT issue as all second hand goods for personal use. Arrived at customs in Germany on 3 February, cleared customs 20 March, so over six weeks in customs, still waiting for delivery.

 

Paul

That's worth knowing Paul, thanks for the heads up. My sister lives in Germany and for the last 30-plus years we've been used to swapping presents and odd bits and pieces without any hindrance. We're going to have to re-think that if German customs is taking over six weeks.

 

"Taking back control" is certainly a flexible concept.

Link to post
Share on other sites
5 hours ago, vildebeest said:

Not directly relevant to the VAT issue, but recently sent a parcel to our son who is student in Germany. Pre-31 December, these took about a week to arrive. There should be no VAT issue as all second hand goods for personal use. Arrived at customs in Germany on 3 February, cleared customs 20 March, so over six weeks in customs, still waiting for delivery.

 

Paul

Second hand goods are not exempt from VAT, there are specific schemes & customs notices (718) in place for these. Neither are goods for personal use exempt. A 6 week delay in German customs might be an indication they were showing 'interest'.

Link to post
Share on other sites
18 hours ago, Model Monkey said:

 

 

That is strange indeed, I filed the application form sometime in December 2020 and I didn't encounter any issues. I don't have an EORI number and it was not required to provide one when completing the VAT application.

I had online chats with five HMRC staff and they all said basically different things...I always had to point them to their own published documents. And the issue of how parcels were to be identified at the border when VAT was indeed already paid wasn't answered by anyone. One very helpful staff at least admitted that it was a question falling between the departments of VAT and excise and customs and communication between different departments wasn't the best. I was booked in for a call-back by a higher level of customer support, but they didn't keep the appointment!

That said advisor also said that having an EORI number can't hurt, but is not necessary in this case.

 

For now, I hand-write on the shipping label "VAT PAID" and my VAT number as the added bit of trouble is that Japan Post doesn't have the provision to print those bits of information onto the label. There are prepared lines to enter this information when you create the label online but it still doesn't print onto the label! I've raised the issue with JP and they are looking into it (soon-ish).

 

J

Link to post
Share on other sites
19 hours ago, bootneck said:

Would that mean you only have to do that laborious form filling once?  After that, you just fill in a normal customs chit and the relevant code/number and contents?

 

Mike

 

Yes, the application form only needs to be filled once in order to obtain the VAT number. However, you need to add a couple bits more information onto the customs label on your parcel. The you need to keep the invoices of UK orders separate and file a VAT return quarterly on the HMRC website. One thing I haven't quite worked out yet is which conversion rate to use. I charge my prices and as such VAT in Yen and that's how it appears on my invoices. However, HMRC of course want to be paid in Sterling - do I convert the total at the time of filing my return, or converting each transaction with the exchange rate at the time of purchase? Hmmm...

 

J

  • Sad 1
Link to post
Share on other sites

Monthly? In my day they changed daily, as did Levy rates and Sugar surcharges. The joys of importing Indian foodtuffs by the container load, when it was comprised of several dozen different items, all due to foodstuff levys.

Link to post
Share on other sites
  • 1 month later...

I got hit for customs fees last year importing from the USA .

This year in March I wanted to order the ‘Detail in Scale ‘ 1/48 diorama accessories direct

from the manufacturer in Holland ,and they recommended I order from uk

due to customs charges etc

i ordered from a UK supplier instead .

this brexit is having an impact

Link to post
Share on other sites

Re the VAT thing with ebay & labelling to show it has been paid, I have been paying GST to ebay for some time now, & when they turn up the label, presumably printed by the seller from an ebay file, had the IRD rego number & statement that GST had been paid. I'd be surprised if this couldn't happen with VAT & HMRC.

Steve.

Link to post
Share on other sites
  • 2 weeks later...

I received the Arma newsletter today. At this point they're not accepting orders from the UK below 135 pounds because of the VAT registration requirement. Above that it's zero VAT but to be collected on arrival. 

 

So unless you're buying bulk Arma kits. You'll have to source them elsewhere. 

 

It doesn't affect me because of course we Irish remain in the EU. But it is clear to me that many UK retailers have it sorted. Only just now we've had a (yet another) mirror for the living room, delivered from Reading. No issues at all. Same with a delivery of CDs I ordered from Coventry, VAT was deducted but not added on at this end. Very happy with that. 

 

I suspect a lot of this will be settled in due course. I have a feeling the likes of Arma doesn't want to lose out on the UK market. 

 

 

Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...