VAT nightmare incoming

[Circloy]

6 hours ago, roym said:

A safe bet would be that the reverse is also likely...

 

It's inevitable that Duties & Taxes will be payable, the threads made that clear. the lower limits may be different, or non existing, if importing to the UK.

 

What's not been asked/discussed is what happens when an item bought prior to the separation on the 1st January (https://www.gov.uk/prepare-to-import-to-great-britain-from-january-2021) transits the border after this date?

The seller has ligitimately applied the appropriate taxes at the time of sale. HM Customs & Revenue may, again legitimately, apply duties & taxes at the time of import.

A double whammy to the buyer.

[Robert]

I have just placed an order with a hobby shop in Japan and they have said they are aware of the new tax regs in the UK and are taking appropriate action.

 

Regards

Robert

[JeffreyK]

11 hours ago, Robert said:

I have just placed an order with a hobby shop in Japan and they have said they are aware of the new tax regs in the UK and are taking appropriate action.

 

Regards

Robert

Would be very interested in learning what those "appropriate actions" would be...?

 

J

[Robert]

Hi Jeffrey, they have said they will be abiding by the rules and have procedures in place.

 

Regards

Robert

[Wezra]

Just had the following email from Ultracast over in Canada.

 

'To our valued UK customers:

 

As you may know, as of January 1, 2021 the United Kingdom will be requiring all companies outside of the UK to register and collect UK VAT.  We have been attempting to register, however after many hours of repeated attempts, it would appear that the UK government website is not really set up to deal with overseas companies trying to register.

 

At this point, we are just unwilling to proceed any further, wasting time and energy trying to register to do someone else’s work for no pay.  Perhaps, in the future, if the UK government is willing to make an easier process to register, we would re-investigate it at that time.

 

Therefore, as of January 1, 2021, Ultracast will no longer be accepting website orders from the United Kingdom.  The UK government has decided that it would like companies in other nations to do their tax collecting job for them instead of doing it themselves as the parcels arrive at the border.  We are just a “mom & pop” operation and don’t really have the time, energy or resources to become tax collectors for the rest of the world.  By the looks of it, the EU will be next come July 2021.'

 

Annoying stuff.

[JeffreyK]

I will probably end up in the same position. I'll try to register (even though at this point I still have no idea how parcels sent to the UK should be marked when VAT was collected by me), but if things don't go well I'll have to suspend selling to the UK for the time being...

J

[Duncan B]

I had the email from Ultracast too. It's sad to note that despite his willingness to comply the system has lead him to a position where it is easier to just suspend sales to the UK, also his (quite understandable) frustration at being asked to be an unofficial Tax collector for HMRC is evident.

I suspect the will not be alone in suspending sales to the UK.

 

Duncan B

[JohnT]

I suspect the obvious lunacy of HMG/ HMRC expecting overseas businesses to recover and account for UK taxes ( on top of those tax burdens imposed on them by their own domestic tax authorities) won’t last the course. It will dawn on someone eventually and get “reformed” in a year or two. I despair at the lack of imagination on the part of senior civil servants. Do they really think overseas foreign business will happily do their work for them free gratis?  Hello? Anyone in? 

Personally I’d be happy to see the back of VAT as a tax. Consequent lost tax revenue would need to come from alternative taxes or increases in existing taxes but the hassles with VAT are a wasteful burden on business. I charge VAT to my customer but I get to recover Vat I pay out to my suppliers. Those same suppliers in turn pay VAT on what the VAT I have paid them but they in turn set off the VAT they pay to their suppliers and so on and on all the way down the supply chain. Result is dozens of businesses all paying tax and claiming back tax all the way down the manufacturing and supply process with each time any surplus proportion getting to the tax office. Loads of work for modest returns but that burden and cost shifted onto businesses thereby reducing profitability and consequently the tax to be paid on that profit. 
 

As I heard one accountant say only our French friends could dream up such a convoluted, wasteful and bureaucratic tax. 
 

Ideally the best taxes for a government are those which are simple, easy to collect and difficult to avoid paying. A good example is fuel duty or “stamp duty” as was. In short the KISS principle. Vat fails to meet that one. 
 

Meantime I will have my local friends acquire anything locally and bring it over when they visit twice a year. The stash is big enough to allow me to plan ahead 

[Dave Swindell]

Am I missing something here?

A business in the UK doesn't need to register for VAT until their turnover exceeds the taxable turnover threshold, currently £85,000 for this tax year.

I would assume that a foreign business would have the same requirements, i.e. it wouldn't be required to register for VAT until it's exports into the UK exceeded the £85,000 turnover?

[bentwaters81tfw]

^now you've gone and made it complicated.

[JeffreyK]

1 hour ago, Dave Swindell said:

Am I missing something here?

A business in the UK doesn't need to register for VAT until their turnover exceeds the taxable turnover threshold, currently £85,000 for this tax year.

I would assume that a foreign business would have the same requirements, i.e. it wouldn't be required to register for VAT until it's exports into the UK exceeded the £85,000 turnover?

Wrong. The sales threshold is irrelevant for this new scheme, at least under the current wording and the info I got from HMRC directly. ALL commercial sales from abroad to the UK below (!) a transaction total (excl. postage and other fees) of  £135.00 are to use the VAT collection at point of sale and the vendors are to register with HMRC for UK VAT. Sales of above £135.00 will be treated as is, i.e. VAT is charged at the border and collected via R.M. or Parcelforce. That's what the current situation is....

J

[Duncan B]

20 hours ago, JeffreyK said:

Wrong. The sales threshold is irrelevant for this new scheme, at least under the current wording and the info I got from HMRC directly. ALL commercial sales from abroad to the UK below (!) a transaction total (excl. postage and other fees) of  £135.00 are to use the VAT collection at point of sale and the vendors are to register with HMRC for UK VAT. Sales of above £135.00 will be treated as is, i.e. VAT is charged at the border and collected via R.M. or Parcelforce. That's what the current situation is....

J

I can see a situation where foreign Traders may opt to put a minimum sales limit of £135 on purchases from the UK so avoiding this mess and putting the onus on the UK purchasers. To be honest, that's what I would do in this situation.

 

Duncan B

[stevehnz]

I'm struggling to understand why a seller like Ultracast is so concerned as to cease selling to the UK due to being unable to register with HMRC. What are they going to do to him if he isn't registered & keeps sending parcels, short of intercepting them at the border & sending them back or destroying them, there isn't much they could do or would likely to be bothered to do?  @hairystick & @Skodadriver mentioned earlier the situation re New Zealand, I've been pinged for GST by ebay, Hannants, & a couple of Japanese merchants, HLJ & 1999.co.nz, all biggish sellers so over the $70,000 threshold, similar it seem to what our western neighbours do too. Smaller sellers just send me parcels which arrive at the front door without fuss like they have for far longer than someone who lives with me likes.    It is to be hoped that the UK can see sense with something similar but I suppose expecting that from the nation whose biggest legacy to its imperial subjects was a rampant bureaucracy, we shouldn't be surprised by anything.

Steve.

 

[JeffreyK]

45 minutes ago, stevehnz said:

short of intercepting them at the border & sending them back or destroying them, there isn't much they could do or would likely to be bothered to do?  

 

Well, precisely that. Small businesses can't really afford playing Russian Roulette with orders. No one's going to refund or compensate for the loss and customers lose confidence in ordering. You're prepared to have trouble with maybe  2,3 or 4 orders at first, but after that there needs to be certainty. Presently, it seems no one has any idea what's going to happen from January 1st. ...

[stevehnz]

Fair point Jeffrey, put like that, it is pretty untenable. I guess we can be thankful our lot are so pragmatic.

Steve.

[zebra]

There are a couple of comments on here predicting HMRC will see sense - my prediction is it won't. The system will be operating as they intended - what's the incentive for them to change it? Businesses that are big enough and make enough sales to the UK will register and follow the rules, those that are too small to justify the cost won't, and HMRC will have done its job because it will have stopped VAT-free imports competing with British businesses. From HMRC's perspective the lost revenue will be tiny. They just won't care.

 

It seems to me this is a small symptom of a bigger malaise - the world seems to be becoming more protectionist, more insular, putting up barriers. I don't think I'd call that progress.

[PDH]

I used to be heavily involved with VAT accounting but thank goodness for the past 10 years or so have been well away from it.

 

All this intrigues me very much that HMRC would try and impose VAT Registration, VAT Collection etc on small businesses overseas. I would see these new regulations aimed very much at the eBay, AliExpress, Amazon type operations in the same way as Australia and GST.

 

So I've just had a very quick and cursory glance at the HMRC website and there would appear to be two general notices of interest -

 

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

 

and https://www.gov.uk/guidance/vat-what-to-do-if-youre-an-overseas-business-selling-goods-in-the-uk

 

The first was last updated on December 3rd and to me is aimed at the businesses I listed above.

 

The latter contains the following statements -

 

Threshold for distance selling

The distance selling threshold is £70,000. If the annual value of your distance sales into the UK and the Isle of Man is less than the distance selling threshold, you charge VAT at the rate that applies in your own country. You will also account for the VAT in your own country.

If the value of your distance sales goes over the limit then you have to register for UK VAT. You then charge VAT on your VAT taxable sales at the UK rate instead of using your own country’s rate and account for it in the UK.

You can apply to register for UK VAT as a distance seller voluntarily, even if you do not exceed the threshold.

 

Sales to the UK from outside the EU

If you are outside the EU and you sell goods to customers in the UK then this is not classed as distance selling for VAT purposes. The Channel Islands are not part of the EU.

Your customers should be aware that they may have to pay UK import VAT on the goods when they arrive in the UK. They may also have to pay duty.

 

VAT registration

You must register for VAT in the UK if you’re:

a UK seller selling goods as a business activity in the UK, and your business’s VAT taxable turnover is more than £85,000 a year. Register online or by post using a VAT1

an overseas seller selling goods as a business activity where those goods are located in the UK at the point of sale, or where the goods are sold to a UK customer and then imported into the UK by the seller (there is no threshold). Register online or by post using a VAT1

selling goods as a business activity that are in an EU member state (known as ‘distance selling’) and your sales to UK consumers are more than £70,000 a year. 

 

Bearing in mind this notice is dated 31JUly2018 and may have been amended/superseded by another Guidance Note but it is still displayed on the HMRC website so I assume it is still valid.

 

So businesses such as Ultracast I see it as there is a £700,00 threshold before VAT registration is required and in the main things continue exactly as they are at present if you are outside the EU. Now as we are leaving the EU then I assume everywhere falls under the £70,000 threshold and otherwise things continue as they currently are bearing in mind 'Your customers should be aware that they may have to pay UK import VAT on the goods when they arrive in the UK. They may also have to pay duty.'

 

I may have missed the point or something of great importance but has this all been over blown?

 

P

 

Edited December 6, 2020 by PDH
Grammar

[Duncan B]

15 hours ago, PDH said:

I used to be heavily involved with VAT accounting but thank goodness for the past 10 years or so have been well away from it.

 

All this intrigues me very much that HMRC would try and impose VAT Registration, VAT Collection etc on small businesses overseas. I would see these new regulations aimed very much at the eBay, AliExpress, Amazon type operations in the same way as Australia and GST.

 

So I've just had a very quick and cursory glance at the HMRC website and there would appear to be two general notices of interest -

 

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

 

and https://www.gov.uk/guidance/vat-what-to-do-if-youre-an-overseas-business-selling-goods-in-the-uk

 

The first was last updated on December 3rd and to me is aimed at the businesses I listed above.

 

The latter contains the following statements -

 

Threshold for distance selling

The distance selling threshold is £70,000. If the annual value of your distance sales into the UK and the Isle of Man is less than the distance selling threshold, you charge VAT at the rate that applies in your own country. You will also account for the VAT in your own country.

If the value of your distance sales goes over the limit then you have to register for UK VAT. You then charge VAT on your VAT taxable sales at the UK rate instead of using your own country’s rate and account for it in the UK.

You can apply to register for UK VAT as a distance seller voluntarily, even if you do not exceed the threshold.

 

Sales to the UK from outside the EU

If you are outside the EU and you sell goods to customers in the UK then this is not classed as distance selling for VAT purposes. The Channel Islands are not part of the EU.

Your customers should be aware that they may have to pay UK import VAT on the goods when they arrive in the UK. They may also have to pay duty.

 

VAT registration

You must register for VAT in the UK if you’re:

a UK seller selling goods as a business activity in the UK, and your business’s VAT taxable turnover is more than £85,000 a year. Register online or by post using a VAT1

an overseas seller selling goods as a business activity where those goods are located in the UK at the point of sale, or where the goods are sold to a UK customer and then imported into the UK by the seller (there is no threshold). Register online or by post using a VAT1

selling goods as a business activity that are in an EU member state (known as ‘distance selling’) and your sales to UK consumers are more than £70,000 a year. 

 

Bearing in mind this notice is dated 31JUly2018 and may have been amended/superseded by another Guidance Note but it is still displayed on the HMRC website so I assume it is still valid.

 

So businesses such as Ultracast I see it as there is a £700,00 threshold before VAT registration is required and in the main things continue exactly as they are at present if you are outside the EU. Now as we are leaving the EU then I assume everywhere falls under the £70,000 threshold and otherwise things continue as they currently are bearing in mind 'Your customers should be aware that they may have to pay UK import VAT on the goods when they arrive in the UK. They may also have to pay duty.'

 

I may have missed the point or something of great importance but has this all been over blown?

 

P

 

Is it not the case that the first notice is still currently valid but will superseded by the second notice on Jan 1st 2021? 

 

Duncan B

[PDH]

5 hours ago, Duncan B said:

Is it not the case that the first notice is still currently valid but will superseded by the second notice on Jan 1st 2021? 

 

Duncan B

 

The first notice near the bottom includes the following statement -

 

Direct sellers - businesses making sales direct to GB customers rather than via an OMP

Businesses making sales of goods not exceeding £135 in value (per consignment) to customers in the UK, where the goods are outside the UK at the point of sale, will become liable to register and account for VAT on those sales. You can find more information on Overseas business selling goods in the UK.

 

The 'Overseas business selling goods in the UK' is a link to the second notice I've quoted above. So to me the second notice would remain current, the first amending the second for the situations stated in the first notice. Re-reading the first notice - its all about OMP (Online Market Places) and where the goods are supplied from and their VAT treatment.

 

Its typical HMRC speak confusing but my view would be under £70k sales from overseas no change to how it currently works. No doubt time will tell if I got it right.

 

I fully intend to try an order as soon as I can in 2021 from overseas and see what happens.

 

P

Edited December 7, 2020 by PDH

[Modelraynz]

On 06/12/2020 at 23:36, stevehnz said:

I'm struggling to understand why a seller like Ultracast is so concerned as to cease selling to the UK due to being unable to register with HMRC. What are they going to do to him if he isn't registered & keeps sending parcels, short of intercepting them at the border & sending them back or destroying them, there isn't much they could do or would likely to be bothered to do?  @hairystick & @Skodadriver mentioned earlier the situation re New Zealand, I've been pinged for GST by ebay, Hannants, & a couple of Japanese merchants, HLJ & 1999.co.nz, all biggish sellers so over the $70,000 threshold, similar it seem to what our western neighbours do too. Smaller sellers just send me parcels which arrive at the front door without fuss like they have for far longer than someone who lives with me likes.    It is to be hoped that the UK can see sense with something similar but I suppose expecting that from the nation whose biggest legacy to its imperial subjects was a rampant bureaucracy, we shouldn't be surprised by anything.

Steve.

 

Lol well put, businesses should remember this is pretty much un-enforceable...any clogging of the system gets very costly for the host country, very quickly.

 

Unofficially from a colleague involved in the process: I've heard it got so expensive and time consuming to try and enforce it, now its just "standout" items that get quieried ie: "big box with yamaha on it" 

 

regular mail items and their tiny gst amounts to collect (which our hobby falls into), just dossnt offset the $19+ per hr min wage for the worker or the space to hold it!!

 

[Duncan B]

5 hours ago, Modelraynz said:

Lol well put, businesses should remember this is pretty much un-enforceable...any clogging of the system gets very costly for the host country, very quickly.

 

Unofficially from a colleague involved in the process: I've heard it got so expensive and time consuming to try and enforce it, now its just "standout" items that get quieried ie: "big box with yamaha on it" 

 

regular mail items and their tiny gst amounts to collect (which our hobby falls into), just dossnt offset the $19+ per hr min wage for the worker or the space to hold it!!

 

All true enough but a small business can't take the chance that it's orders, no matter how small, are being delayed or destroyed/returned from Border checks. Put another way, how long would you wait as a customer for your item to arrive before contacting the vendor to say, "sorry mate but my order hasn't arrived. Please refund me or send another"? It will put small businesses in a risky position if they just send the items regardless as they will always be wondering if and when the packages are going to arrive at their destination. That's a gamble that most small businesses will probably not take  as it doesn't take many refunds or reissues to start biting into the profit margins and it doesn't take many cases of telling customers to wait it out longer to drive them away either so it really isn't worth the risks.

The situation may well end up the way you describe but until things settle down I doubt we will see very many of the one man businesses taking the risk. One thing's for sure we here in the Uk don't have long to wait to find out!

 

Duncan B

[ckw]

27 minutes ago, Duncan B said:

All true enough but a small business can't take the chance that it's orders, no matter how small, are being delayed or destroyed/returned from Border checks. Put another way, how long would you wait as a customer for your item to arrive before contacting the vendor to say, "sorry mate but my order hasn't arrived. Please refund me or send another"? It will put small businesses in a risky position if they just send the items regardless as they will always be wondering if and when the packages are going to arrive at their destination.

Of course thanks to Covid that situation already exists. Many shipments have been delayed for one reason or another. Come Jan. no one will really know if the delay is customs or covid related, so really no change. In a way Covid provides a buffer - assuming at least 6 months for things to de-covid, it would be hoped that the import rules and procedures will have been clarified.

 

Cheers

Colin

[Filbert_Wang]

Regardless of how well things are handled or not, I'm just waiting for things to become more awkward. To the point where you will just order from within your country (either inside or outside the UK) because you can't be bottomed.

 

Recently ordered from Hong Kong, package (containing a couple of video games) got stopped randomly by customs. Denied entry (they weren't dodgy games before you ask ) and have now disappeared into back and forth of being sent God-knows where. 

 

Over two months now waiting for the company to track them down (although I did have to send a 'my patience has run out!' email not long ago)

 

Used to have the same thing while working in Asia, I think the customs people used to roll a dice to decide whether parcels coming out from back home were allowed through, opened up (with the items inspected) or returned to sender!

[JeffreyK]

On 12/7/2020 at 2:04 AM, PDH said:

I used to be heavily involved with VAT accounting but thank goodness for the past 10 years or so have been well away from it.

 

All this intrigues me very much that HMRC would try and impose VAT Registration, VAT Collection etc on small businesses overseas. I would see these new regulations aimed very much at the eBay, AliExpress, Amazon type operations in the same way as Australia and GST.

 

So I've just had a very quick and cursory glance at the HMRC website and there would appear to be two general notices of interest -

 

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

 

and https://www.gov.uk/guidance/vat-what-to-do-if-youre-an-overseas-business-selling-goods-in-the-uk

 

The first was last updated on December 3rd and to me is aimed at the businesses I listed above.

 

The latter contains the following statements -

 

Threshold for distance selling

The distance selling threshold is £70,000. If the annual value of your distance sales into the UK and the Isle of Man is less than the distance selling threshold, you charge VAT at the rate that applies in your own country. You will also account for the VAT in your own country.

If the value of your distance sales goes over the limit then you have to register for UK VAT. You then charge VAT on your VAT taxable sales at the UK rate instead of using your own country’s rate and account for it in the UK.

You can apply to register for UK VAT as a distance seller voluntarily, even if you do not exceed the threshold.

 

Sales to the UK from outside the EU

If you are outside the EU and you sell goods to customers in the UK then this is not classed as distance selling for VAT purposes. The Channel Islands are not part of the EU.

Your customers should be aware that they may have to pay UK import VAT on the goods when they arrive in the UK. They may also have to pay duty.

 

VAT registration

You must register for VAT in the UK if you’re:

a UK seller selling goods as a business activity in the UK, and your business’s VAT taxable turnover is more than £85,000 a year. Register online or by post using a VAT1

an overseas seller selling goods as a business activity where those goods are located in the UK at the point of sale, or where the goods are sold to a UK customer and then imported into the UK by the seller (there is no threshold). Register online or by post using a VAT1

selling goods as a business activity that are in an EU member state (known as ‘distance selling’) and your sales to UK consumers are more than £70,000 a year. 

 

Bearing in mind this notice is dated 31JUly2018 and may have been amended/superseded by another Guidance Note but it is still displayed on the HMRC website so I assume it is still valid.

 

So businesses such as Ultracast I see it as there is a £700,00 threshold before VAT registration is required and in the main things continue exactly as they are at present if you are outside the EU. Now as we are leaving the EU then I assume everywhere falls under the £70,000 threshold and otherwise things continue as they currently are bearing in mind 'Your customers should be aware that they may have to pay UK import VAT on the goods when they arrive in the UK. They may also have to pay duty.'

 

I may have missed the point or something of great importance but has this all been over blown?

 

P

 

 

They way I read that is that the £70,000 threshold applies to "distance selling" as a EU legal concept and paragraph two says: "If you are outside the EU and you sell goods to customers in the UK then this is not classed as distance selling for VAT purposes. The Channel Islands are not part of the EU."

So not only does this therefore not apply to sellers/vendors currently outside the EU (i.e. Utracast in Canada or me in Japan), but from Jan 1st all sellers outside the UK as the UK will be outside the EU.

So for now, I still think there is no threshold and the new system applies to all commercial sales to the UK, no matter how little or how small....

J

[Modelraynz]

18 hours ago, Duncan B said:

All true enough but a small business can't take the chance that it's orders, no matter how small, are being delayed or destroyed/returned from Border checks. Put another way, how long would you wait as a customer for your item to arrive before contacting the vendor to say, "sorry mate but my order hasn't arrived. Please refund me or send another"? It will put small businesses in a risky position if they just send the items regardless as they will always be wondering if and when the packages are going to arrive at their destination. That's a gamble that most small businesses will probably not take  as it doesn't take many refunds or reissues to start biting into the profit margins and it doesn't take many cases of telling customers to wait it out longer to drive them away either so it really isn't worth the risks.

The situation may well end up the way you describe but until things settle down I doubt we will see very many of the one man businesses taking the risk. One thing's for sure we here in the Uk don't have long to wait to find out!

 

Duncan B

 

Yea thats a totally valid point - they could offer the choice of "dont grift the VAT ill risk it" but thats probably my liberterian side coming out

 

Certainly for a far larger country like the UK it entails more risk for a business than our pacific outcropping of 5million lol

 

Retail associations here hoped it would return people to buying local but that hassnt happened... mainly due to lack of variety of stock:  modeling wise every shop here pretty much has the same stock at the same price as dictated by the same couple of wholesalers! 

 

$1-2 vat dossnt deter when you have all those kit already!!

 

What we really need is a postal version of a VPN LOL!