As part of Brexit, the UK will soon begin to impose import fees on goods entering the country from international sellers. This change will apply to all international sellers sending lower-valued items into the UK, both inside and outside the European Union. Here are the details of the new UK VAT structure, and how you can prepare for it.
Sellers Will Now Be Responsible for Paying UK VAT for Goods Under £135 (roughly $175 USD)
This new change will take effect on January 1, 2021 to coincide with the official date of Brexit. On that day, goods imported to England, Scotland, and Wales will face the new VAT (aka Value-Added Tax). Northern Ireland, however, will have a special VAT status to ensure frictionless trade with Ireland.
Per the new structures, all of these changes apply only to goods valued at or below £135. For American shippers, that amount translates to roughly $175 USD.
Below, we’ve summarized the main changes for the new UK VAT structure:
- Sellers must now pay VAT instead of recipients in the UK. The due date to pay these taxes will also move from the point of importation to the point of sale
- Online marketplaces where the sale takes place (such as eBay or Etsy) will be responsible for collecting and accounting for the VAT. In this case, the online marketplaces becomes the supplier, not the shipper. So, the individual shipper won’t have to register and account for UK VAT
- If a direct sale to UK customers takes place without an online marketplace, then sellers will be required to register and account for the VAT to the UK’s HM Revenue and Customs Department
- Where business-to-business sales are made to a UK VAT-registered trader, if the business customer is VAT registered in the UK and provides its valid VAT registration number to the seller, the customer will pay the VAT via a reverse charge
Don’t Forget the Recipient’s Tax ID Number
Similar to Brazil’s recent change on customs requirements for imported goods, the importer’s Tax ID number will likely be required on all goods sent to Great Britain. Recipients are responsible for providing sellers with this information upon point of sale. In turn, shippers are responsible for including this information on the shipping label. This is highly important. When these changes take effect, sellers should refrain from shipping items to the UK until they have their recipient’s Tax ID number.
Pro Tip: If you’re looking for a place to put this information on your labels, you can use the secondary address field (where you’d normally include an apartment/suite/unit number). You can also include this in the optional “Company Name” field.
How Can I Prepare?
If you’re an American shipper who sends a lot of items to the UK, there are a couple of different ways to prepare for the new VAT structure. Recipients in the UK will most likely not be too excited about paying an extra fee when they purchase lower-value items online. However, if you frame it that you’re responsible for these fees instead of them, they will likely be more amenable to spent a little extra when they make their initial purchase.
Alternatively, you could always price these additional costs into your products right off the bat. That way, your UK recipients won’t have to worry about paying any “extra fees” at checkout, and the VAT will automatically be covered. Whichever option you decide, you should absolutely make your UK recipients aware that they will need to provide their Tax ID number with their address information.
Want more information? Check out this post from the UK’s HM Revenue and Customs Department.