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VAT nightmare incoming


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22 hours ago, Pete in Lincs said:

So if an overseas seller just sends your parcel and doesn't pay the VAT. Will HMRC chase them up? Would it be economically viable?

And, If an overseas seller just sends a parcel, I am going to pay more for it's contents, do I then assume that matey will pay the VAT?

If he doesn't, will they then chase me? Sounds like it's simply not going to be worth buying even cheap stuff unless you REALLY need it.

 

I assume this will stop the RM and other agents from withholding your parcel until you pay them VAT & 'Handling' charges.

No, I suspect that you will be asked to pay the VAT and a fee just as you are now when you order something from abroad (which totally defeats the point in this exercise) or possibly HMRC (or their Agent) will simply seize the item and flog it off.

This "plan" first appeared back in the early summer and I've been waiting to see the meat appear on the bones (not that it directly affects my imports which are above the threshold mentioned) but just like many other post Brexit plans there is not a lot of information actually available at this time. I currently import quite a few Brands from the EU so am keen to know what to expect come 1st January 2021.

 

Duncan B

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Genuine question at the end of this rambling...

 

its all well and good to say this will level the playing field but thats only when the items are available in the UK. I can't see the likes of the cottage industry who generate most or all sales from direct sale on their websites bothering to sell to the UK anymore. Thinking of Max Decals, Caracal, Starfighter decals, Wolfpak decals etc, and then the likes of Special Hobby, Eduard etc, and that's before we get into photo etch or resin. Who in the UK sells a dedicated photo etch for Titanic or decals for USS Nimitz that are NOT Gold Medal Models or Starfighter? Who besides Max Decals does Irish Air Corps Walrus or PC-9 decals? I know some companies have deals with the likes of Hannants but I hope you get my drift. I see the point about kits but what when the online retailer is the ONLY source for the item? E.g with Aeroclub gone are SAC the only source of metal undercarriage parts? If this ends up Piddling off the EU and they decide to reciprocate can the likes of Flightpath continue to sell to the EU? And lastly,  is this the end of Britmodellers outside the UK selling our surplus kits and decals to britmodellers in the UK on the Britmodeller buy and sell section? 

 

(Sorry had to laugh when I saw the term "post brexit plans" ... up there with "military intelligence"...)

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Is there a small point being missed in the last several replies or am I missing something?  What if seller abroad charges buyer in UK a price for goods including VAT but then fails to pay VAT to HMRC?  I assume HMRC have a mechanism for non delivery which hardly seems fair on UK purchaser.  
 

Ive always thought VAT an abominable tax deriving from the French waterfall tax as it does. Assuming goods travel through several hands before end purchaser the admin is bonkers. Eg if my business does work for itself technically I am supposed to invoice myself, pay VAT and then reclaim the VAT.  
 

The best taxes for the Government are the ones easy to collect and difficult to avoid. 

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1 hour ago, roym said:

is this the end of Britmodellers outside the UK selling our surplus kits and decals to Britmodellers in the UK on the Britmodeller buy and sell section? 

Apparently not. This was posted on a similar thread on Hyperscale.

 

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What are those "added costs" that have been mentioned here a few times which are supposed to make doing business unviable? VAT would be paid by the customer and added to the bill total. Are there fixed running fees for the privilege of paying HMRC??

In theory, the system could have some benefits in that you don't have to pay VAT on shipping costs and potentially the RM handling charge could be done away with.

 

What I don't like at all is the lack of detailed information on how it's supposed to work in practice and the lack of preparation on the HMRC website and application forms. Apart from the one article quoted above, none of the content has been updated to really reflect the new situation.

How will customs know that an incoming parcel has VAT paid? How does the seller deal with HMRC and make payments? How does HMRC know or verify how many sales the seller has made and how much VAT is owed? How is a non-English language proficient seller supposed to a) know about these changes and b) understand and fill in the application form and then deal with the running of this?

I'll try and contact HMRC, but I'm not exactly hopeful for a speedy reply...

 

J

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8 hours ago, JeffreyK said:

What are those "added costs" that have been mentioned here a few times which are supposed to make doing business unviable? VAT would be paid by the customer and added to the bill total. Are there fixed running fees for the privilege of paying HMRC??

In theory, the system could have some benefits in that you don't have to pay VAT on shipping costs and potentially the RM handling charge could be done away with.

 

What I don't like at all is the lack of detailed information on how it's supposed to work in practice and the lack of preparation on the HMRC website and application forms. Apart from the one article quoted above, none of the content has been updated to really reflect the new situation.

How will customs know that an incoming parcel has VAT paid? How does the seller deal with HMRC and make payments? How does HMRC know or verify how many sales the seller has made and how much VAT is owed? How is a non-English language proficient seller supposed to a) know about these changes and b) understand and fill in the application form and then deal with the running of this?

I'll try and contact HMRC, but I'm not exactly hopeful for a speedy reply...

 

J

The added costs will, most likely, be some form of registration paperwork with HMRC. The "most likely" part of that previous statement goes some way to reflect the current situation, that nobody can answer your other questions with any degree of certainty. There is no ink dried on any formal Trade Deals at the moment (someone forgot to turn the oven on for the "Oven Ready Deal") so we are all stumbling around in the dark.

 

The modelling industry is just a tiny piece of the trade jigsaw so I doubt HMRC gives a stuff about the 'cottage industries' (I hate that term as it demeans the hard work that small business owners put in to create and distribute their own products and brands) but, sadly, it's probably that side of the Modelling world that will be affected the most within the UK market (but the rest of the world is still out there).

 

Anyway, unless the UK public have been asleep for the last 3 or 4 years then they must have seen this train crash coming, I'm sure us small business owners did.

 

Duncan B

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8 hours ago, JeffreyK said:

What are those "added costs" that have been mentioned here a few times which are supposed to make doing business unviable? VAT would be paid by the customer and added to the bill total. Are there fixed running fees for the privilege of paying HMRC??

In theory, the system could have some benefits in that you don't have to pay VAT on shipping costs and potentially the RM handling charge could be done away with.

 

 

The registration with HMRC may well cost nothing or very little. The costs for a business will be others, as you run a small business yourself you'll sure have them in mind, for others it may be worth mentioning a few...

The dealer will have to keep separate VAT books for UK sales (and there will be the need, either legal or simply practical to keep separate books). It's an extra cost, be it because it will require time for the existing personnel or because any external tax advisor will charge more for this.

The presence of a foreign VAT on gross revenues will have to be dealt with in the accounting presented to the dealer own Revenue office. Each country will have their way of dealing with this, for sure it will not be an easy thing to deal with and will involve extra time and money spent on it.

Then there's the matter of having to remit the VAT value to the UK, that can be easily done with a bank transfer on which however the banks will ask a fee since it will be a transfer to a foreign account in a foreign currency.

Larger companies will likely just register and offload the extra costs on their customers. I have no insight knowledge but I'd expect all kit manufacturers with an online presence to do so, afterall they have a size that justify this.

For the smaller businesses it will be a case-by-case decision: if overall the quota of UK orders makes the extra costs viable, it may be worth going through all the hassles. If the amount of UK orders is small, then it becomes not worth anymore and at that point the dealer will simply stop dealing with UK customers. Or will have to ask their customers to accept other options. In the case of the "cottage industry" it may be pretending it's a consumer-to-consumer sale... that is what a number of dealers on Ebay do anyway 

 

P.S. regarding finding an answer to your questions, I wish you good luck ! I've been working with UK customers for many years in my main business and every time we discuss any future change due to Brexit the answer I get most often from them is "we'd like to know too !". Companies have been working on different scenario even before the referendum, the same doesn't seem to have happened in all offices of those responsible for the new regulations

 

 

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Even though we know about it, it is going to be a shock for the rest of the population who buys from overseas.

 

Regards

Robert

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As others have said, something like this has been in force in Australia for a while. The difference here is that there's a threshold - if the overseas seller doesn't exceed $75,000 sales to Australian customers in a year they don't have to register and don't have to charge the GST. So small businesses aren't affected. The bigger sellers seem to have adapted - it's certainly getting charged by eBay and Hannants for a start (Hannants packages come with a sticker on them saying GST has been paid).

 

The problem with the incoming UK rules seems to be that there's no threshold, so it's charged on all sales regardless. There's going to be an implementation cost - cost of registering, additional bookkeeping and admin costs, perhaps updating software so that the VAT can be added to the invoice - so I wouldn't blame a small business owner who decides that selling into the UK isn't worth it. Whereas in Australia it doesn't seem to have got any harder to buy from overseas, just more expensive, and it seemed to get a bit slower when the change happened (presumably because of customs checks).

 

My experience in Australia is that it didn't really change my purchasing habits. This is mostly because I only buy from overseas if it's something I can't get here (which happens a lot), or if the price is so much lower that it's still significantly cheaper after adding postage (which is pretty pricey in a lot of cases). But I can see how it might level the playing field for British model shops - firstly because I don't think there's as much that you can't buy locally as there is here so it's more of an economic decision, and secondly because the 20% VAT rate makes it more likely that it'll sway your decision than our 10% GST. So it might turn out to be a good thing for British model shops. But if smaller suppliers stop selling to the UK, it'll be the modeller who loses out. Somehow I doubt that anyone at HMRC will lose any sleep over that!

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I just chatted with an advisor at HMRC and she basically couldn't tell me anything further to what is written in those documents. She referred me to a "VAT guide" https://www.gov.uk/guidance/vat-guide-notice-700 to help me understand how the registration, VAT reporting and payment works.

My questions on how this is policed and how Customs or Royal Mail will know that VAT has been paid couldn't be answered. She referred me over to HM Excise and Customs, Import/Export section to try and get an answer.

Still trying...

J

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1 hour ago, zebra said:

As others have said, something like this has been in force in Australia for a while. The difference here is that there's a threshold - if the overseas seller doesn't exceed $75,000 sales to Australian customers in a year they don't have to register and don't have to charge the GST.

 

 

That just highlights the absurdity of what is proposed for the UK. At the moment registration for "distance selling" is only required above a threshold of £70,000.

 

Oh well, if it comes to the worst I have family in Germany and could probably set up a smuggling route ....... :mental:

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4 hours ago, Giorgio N said:

The registration with HMRC may well cost nothing or very little. The costs for a business will be others, as you run a small business yourself you'll sure have them in mind, for others it may be worth mentioning a few...

In his tweet explaining why his online store would no longer be shipping to UK addresses, William Shatner mentioned it was going to cost £1,000 to get his business registered with HMRC. It wasn’t clear if that is the total of fees paid to HMRC to register or if it represents the cost of legal consultation to fill out the forms and submit them.

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7 hours ago, JeffreyK said:

chatted with an advisor at HMRC

Cor! THAT alone makes it you have a superpower! While working for DWP, deviate from the script when talking to HMRC and down went their phone, end of.

Along with the number of personnel who have left the organisation over the last 12 - 15 years may have some bearing on the speed in which changes are announced,

speed in which phones are answered and the whole lot appearing to be in meltdown!

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7 hours ago, Skodadriver said:

 

 

Oh well, if it comes to the worst I have family in Germany and could probably set up a smuggling route ....... :mental:

 

Aye - I can see it now - driving through Dover docks in a truck  - no drugs, no illegal immigrants, no money laundering, cheap cigarettes or booze but a ton and a half of kits from the Far east.   "Your knicked - Our specially trained sniffer dogs can detect a Trumpeter kit at a mile " Oh the shame of it.............

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As advised by the VAT advisor at HMRC yesterday, I'm now chatting with an advisor at the Excise and Customs Import/Export section to get to the bottom of how sending parcels are supposed to work.

Guess what? They don't know! The agent insists (even after consulting with two technical advisors) that it's a VAT section question and I have to go back and ask the VAT section.

Comedy?

 

J

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49 minutes ago, JeffreyK said:

Comedy?

Yes.  Of errors though, and no-one's smiling.  I'm sure it'll get sorted out somewhere down the line, but you'd think that before announcing new regs that they'd at least take the trouble to educate and inform their own customer facing staff :shrug:

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1 hour ago, JeffreyK said:

Guess what? They don't know! The agent insists (even after consulting with two technical advisors) that it's a VAT section question and I have to go back and ask the VAT section.

Comedy?

If you want real comedy, use two phones, call them simultaneously and then hold the phones together. 
mayhem ensured :D

 

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20 hours ago, Mike said:

Yes.  Of errors though, and no-one's smiling.  I'm sure it'll get sorted out somewhere down the line, but you'd think that before announcing new regs that they'd at least take the trouble to educate and inform their own customer facing staff :shrug:

Well you would hope so but that hasn't been the case of late. My Mrs works in an Accounts firm and deals with Payrolls among other things so you can imagine the changes that have been taking place with the various furlough schemes. The latest change is to be implemented on the 1st November but as of yesterday (19th Oct) there were still no official guidelines in place so Firms are still in the dark as to what exactly they have to do on the 1st Nov. Currently the whole of the UK Civil Service appears to be a complete shambles but I suspect it's not all their fault. What's that old computer term for poor performance,"GIGO"?

 

@Giorgio N 's post above about the additional costs that will be incurred hits the nail on the head for any small business wishing to import into the UK after 1st Jan. I suspect many one man operations will decide it's not worth the additional costs and effort. I made a similar decision a while back when Germany introduced new Recycling regulations that required Firms from abroad to register with German recycling Firms to 'deal' with the waste packaging from our Goods. 

 

We are all just going to have to wait and see but it does annoy me that there are Adverts running on TV telling Businesses to get ready but when you ask they can't tell you how! I think Corporal Jones from Dad's Army is running the whole thing!

 

Duncan B

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On 10/18/2020 at 2:22 AM, Skodadriver said:

Out of interest does anyone know if any other country in the world expects small foreign sellers to register and account for VAT or the equivalent?

Yes, New Zealand does.

Utter madness, expecting companies around the world to do the dirty work of the taxman instead of them doing it themselves.

It was put to the public as "saving the retail shops in your towns" but does nothing to achieve this.

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The fun continues... Back to an agent in the VAT section. What's new? She claims that none of the changes apply to non-EU countries!! :mental::rofl2: Yeah, right!

 

Update: now she is saying it DOES apply. And the parcels will be identified by new or updated customs declaration documents. So all postal services around the world will issue new customs stickers or documents so UK customs can identify which parcel have and which haven't VAT already paid for??

 

J

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4 hours ago, hairystick said:

Yes, New Zealand does.

Utter madness, expecting companies around the world to do the dirty work of the taxman instead of them doing it themselves.

It was put to the public as "saving the retail shops in your towns" but does nothing to achieve this.

So how does that work in practice?

 

Are the small one-man decal or P/E businesses that we depend on still able and/or willing to sell directly to modellers in New Zealand?

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On 10/18/2020 at 5:02 PM, alt-92 said:

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

 

Going via a search engine it is free, so if anyone is interested copy and paste "UK set to force websites to collect overseas sales VATHM Revenue & Customs reveals plan to combat tax fraud in leaked document" into your favourite search engine and the article will be around or at the top of the list and then click on that, no more pay wall 👍

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5 hours ago, JeffreyK said:

So all postal services around the world will issue new customs stickers or documents so UK customs can identify which parcel have and which haven't VAT already paid for??

Having received several deliveries from multiple countries including JP - Most carriers already do.

Either on the stickers or documents stuck in the sleeve.

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Therefore it will mean we no longer have to pay the RM/PF admin charge as VAT is already paid for 😀

 

Regards

Robert

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7 hours ago, Skodadriver said:

So how does that work in practice?

 

Are the small one-man decal or P/E businesses that we depend on still able and/or willing to sell directly to modellers in New Zealand?

In the UK we have had a VAT Registration threshold for “distance selling” for EU suppliers since 1993.  This requires EU sellers to register and account for VAT in the UK if their sales to non-business or non-VAT-registered customers in the UK if the value of those sales exceeds the threshold.  I dare say that the switched on and pragmatic New Zealanders have a suitable and more refined version of this and I’m sure someone from the Trade Mission at their Embassy in the UK would be delighted to explain it for us.

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