VAT in the Post-EU World

[Kingsman]

Friul have announced that they will no longer be selling their products through third party re-sellers.  In future you will only be able to buy direct from Friul.  This is not a Brexit thing for the UK, it's universal world-wide.

 

There is potentially an advantage for us here in the UK as the post-Brexit import VAT threshold has been raised to £135, excluding shipping. So that should perhaps make Friul products cheaper if you buy several at a time.  You should be able to get 5 or 6 sets for that sort of money.  Yes you will pay more for shipping from outside the UK but the products should be 20% or so cheaper than they used to be, and they were always cheaper in Europe anyway.

[Tim R-T-C]

3 hours ago, Das Abteilung said:

There is potentially an advantage for us here in the UK as the post-Brexit import VAT threshold has been raised to £135, excluding shipping. So that should perhaps make Friul products cheaper if you buy several at a time.  You should be able to get 5 or 6 sets for that sort of money.  Yes you will pay more for shipping from outside the UK but the products should be 20% or so cheaper than they used to be, and they were always cheaper in Europe anyway.

 

Thats not how it works I'm afraid.

 

Deliveries below £135 must have UK VAT added by the vendor who must be registered with the HMRC and submit accounts quarterly for them.

 

Deliveries over £135 will attract VAT and customs duty (up to 25%) and vat on this as well, plus the delivery firm service charge.

[Kingsman]

That isn't how the gov.uk site explains it.  See link below.  There is no mention of VAT charging at source below the £135 limit or of the previous £15 de minimis threshold for VAT.  There are lower limits for gifts, alcohol, tobacco and perfumes.  If it's implicit then it isn't clear, and I speak as one who worked for HMG for 33 years so I'm used to a fair degree of obfuscation and double-speak.  If I'd been given that to draft I would have made it clear that VAT will still be charged at source below £135.

 

Also, I was recently refunded by a Polish seller the VAT I had paid in November on a package that wasn't shipped until January.  Although it did exceed £135.  I wasn't charged by UK authorities either despite a CN22 on the package, but that may just have been the luck of confusion.  I seem to be seeing VAT-free prices on European sellers' websites now, looking at what I paid for the same things back in November when I had a pre-Brexit splurge.  By your explanation individual item prices should be VAT inc for UK customers as before and VAT would only be removed by aggregation. But I noticed last night for the first time on eBay prices from another Polish seller noted as "plus 20% VAT".

 

So what is the right answer here?

 

https://www.gov.uk/government/publications/notice-143-a-guide-for-international-post-users/notice-143-a-guide-for-international-post-users#:~:text=Import VAT is charged at,over £39 in value.

[Kingsman]

The updated info on VAT on personal imports, which is as Tim said it to be.  Confusingly the old page is still live and find-able, and does not state that it is expired.  There is however a post-Brexit link that I had failed to notice.  Apologies for perpetrating confusion.

 

https://www.gov.uk/government/publications/notice-143-a-guide-for-international-post-users/notice-143-a-guide-for-international-post-users#:~:text=Import VAT is charged at,over £39 in value.

 

[colin]

Can you honestly see a small shop or even a large one abroad doing the collecting of vat for the government or just saying we don't send to the UK anymore. Why would they bother when they have the whole of Europe to trade with without the hassel.

Someone in government sold this as a good idea, look they all want to trade with us so lets get them to collect our tax for us so we don't have too 🤣🤣

[Kingsman]

Agreed.  Especially as the arrangement is not reciprocal.  If you are a UK seller you are not required to collect VAT for any of the EU27.  But I can see how that would have been utterly unworkable.  The EU27 are moving towards full VAT harmonisation because there is too much fraud between permitted national differences (Poland temporarily suspended VAT free exports last year for this very reason) but there is no talk of a single collection agency.  That would be the thin end of the wedge to a fully federal EU.

 

Even more disingenuous, you as the importer are legally responsible for the value and goods information declared by the exporter!  WTF?  But I couldn't find anything that explicitly says you are responsible for any tax shortfalls: Border Force will not have access to that information.  Sellers are legally responsible subject to prosecution by HMRC for the correctness of their accounts, which implies handing over any un-collected tax due.  That's not reciprocal either.  If you're VAT-registered, 19 (currently) of the 27 members require you to appoint an in-country agent who is financially responsible for any VAT shortfalls you might cause through incorrect paperwork.

 

I can't help feeling that we've somehow managed to achieve a stinking win-lose defeat here when there was an opportunity for a win-win.  But I suppose that would have meant remaining within the Customs Union and therefore not actually leaving.  With 20% of world tax being raised through VAT, despite about a third of UN-recognised states not actually using it, governments are bound to play hardball over it.  But it is essentially a Victorian system long overdue for reform.  If WTO were prepared to reform such that VAT is always paid at the point and place of sale then the whole system would become incredibly simplified.  But that would lead to it being introduced in the 1/3 of states not currently using it: some of the world's poorest, most strife-torn and least "modernised".

 

I can imagine that larger OEMs will find it worthwhile to register in order to continue supplying UK stores, but perhaps not smaller ones.  They will generally be sending consignments worth more than £135 anyway, when actual tax collection is not required.  But many online stores will perhaps find it unpalatable.  While we think primarily about the changes with the EU, the change also affects sellers in the rest of the world too - and this is perhaps not being appreciated.  Sellers in the rest of the world who have been able to sell VAT-free in the past and rely on collection on import are now also required to register for UK VAT and to collect it up to £135.

 

The clear consequence of the new rules is that business sellers who do not register can no longer supply to the UK.  And the carrot of UK business may not justify the stick of UK VAT registration.  A pal of mine has been told by his usual Dutch supplier of 3D printing resin that he will simply no longer supply to the UK.

 

SNAFU......

[tank152]

Sorry for the thread drift but this is what the48's are doing for goods sent here to the UK.

https://the48ers.com/the-uk-eu-trade-agreement-impact-on-shipments/

 

[Kingsman]

I don't think it's really thread drift as the Friul move has implications for wider business.  But I think it might backfire on them.  Dealing with stores for larger volumes will be a lot less faff than dealing with thousands of individual customers.

 

I didn't delve into online "marketplaces" above as the end result to us as customers is the same.  VAT will be charged at point of sale up to £135.  Individual online stores do not count as "marketplaces": those rules are aimed at platforms such as eBay and the like.  It means that eBay are responsible for collecting the VAT on overseas purchases up to £135 on behalf of the seller.  Which might make selling through eBay more attractive than selling direct for small sellers.  But might also add to eBay fees.

 

I imagine this will not be the last seller to introduce a minimum order value in order to avoif the faff of collecting and submitting VAT.  I think our politicians have been largely thinking of business rather than retail trade with the new regulations, egged on of course by the various business forums and lobby groups we heard from endlessly in the media, ignoring the huge volume of retail international trade that has grown up in the internet age.  Maybe there was thinking that this would provide new business opportunities for UK agents and re-sellers, which it might in time.  But we Brits have traditionally paid more in the UK than in the EU for the same goods, most especially those manufactured in Europe but also sometimes those of US and Far East origin.  Every link in the chain adds a layer of profits and overheads.  If my experiences in Defence are anything to go by, up to 60% of the price we pay goes in profits, handling charges and overheads with 3 or 4 links in the chain.

 

Bound to be bumpy for a while as things settle to a new normal.

[colin]

And if they don't fill in the correct number on the form attached to the outside of the package, you could be paying vat twice, at point of origin and when it gets stopped in the UK with the you can pay the vat again or we seize it/send it back

[Kingsman]

I didn't read that into the regulations.  Delayed, yes.  Siezed, maybe.  Investigated, maybe.  Under general UK VAT regulations, making up under-charged VAT post-sale is the seller's responsibility.  The purchaser has no liability for the seller getting it wrong because the buyer will not in most cases know the base exVAT price and therefore has no way of verifying that the VAT is correct. Fiddling it is of course criminal.

 

But Border Force won't know what's in a parcel unless they open it.  And what will cause them to do that?  They certainly won't be opening everything.  They'll be looking for undeclared duty-able goods.  They'll be looking for gifts masquerading as trade goods to avoid the lower VAT limit.  They'll be looking for big packages with low value.  They'll be looking for forbidden goods.  Dogs will be sniffing.  All packages will be X-rayed and that may show anomalies to investigate.  But ultimately there will need to be something about the package that attracts their interest.  They need "reasonable cause".

 

All international post/mail, letters and parcels, carried by national mail services operating under the UN Universal Postal Union (every UN member except 6 that you are never likely to come across) arriving in the UK is processed through either Heathrow or Coventry hubs.  These are the only places authorised to stop and open mail.  Packages handled by DHL etc are treated differently as they are not mail.  Essentially they are freight and can be in-processed at other locations.  East Midlands Airport is a major hub for freight parcels, for example.  Heathrow has separate handling facilities for mail and freight.  But the VAT and Duty rules apply equally to freight as to mail.

[Kingsman]

There's another more worrying wrinke to this, which came out on Rip Off Britain on The One Show on BBC1 tonight.  It is this.

 

VAT will be levied on the VALUE of the goods, not the price.  The Regulations do say "value" but most of us - Lord Denning's famous Reasonable Man (the man on the top deck of the Clapham Omnibus) - will interpret that to mean the price paid.  How else is the "value" to be determined?  And value is a somewhat nebulous concept: you and I might rate the value of an object very differently.  I'm sure we've all bought something which we've felt to be worth much less than we paid for it.

 

The TV case revolved around some expensive shoes purchased overseas at a discount.  The price paid was below the £135 VAT threshold, but the RRP was well above.  The VAT was levied on the RRP, and the purchaser had no option but to pay.  And that interpretation was held on appeal to be legitimate.  So it seems that RRP will be the measure used to determine VAT.

 

So buying discounted goods overseas might be a problem.  But then some are more obvious than others.  High-brand shoes will clearly not be something you get below the threshold.  I suppose if you knowingly bought counterfeits you might get away with it.  But then that might get them seized.....  However, the sort of goods we modellers buy are less obvious and are perhaps more likely to be taken at invoice value.  Will Mr/Mrs Average Border Force know whether my discounted Panzer Art wheel set is worth the €11 RRP or the €7.50 I paid?  In fact they might be surprised at how much we do pay for small boxes of plastic, resin and brass!

[Kingsman]

I changed the name of this thread as the original title about Friul is now only relevant to the first post.

[Chimpion]

7 hours ago, Das Abteilung said:

And value is a somewhat nebulous concept: you and I might rate the value of an object very differently. 

Value is the average price at which a transaction will take place in an open market. If the market is open, that can only mean the sale price.

I don't know the details of this case, but I suspect the problem the law is designed to cover is an obvious fraud opportunity where a high price transaction exempt from VAT is linked to a low price transaction subject to VAT. One extreme example would be that if you make a large donation to a "charity" in a third country they ship you an item of equivalent value free-of-charge.

 

[bentwaters81tfw]

There is a long running thread on this in main chat.

 

 

[Kingsman]

4 hours ago, bentwaters81tfw said:

There is a long running thread on this in main chat.

In which case I will close this one down if I can and have a look at that one. It started out as something else and morphed into this.