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5 min read

Brexit: how will selling online to EU customers change?

What does Brexit mean for online sellers?

Brexit will change many things for many UK businesses – including those who sell online to EU customers and consumers. So, what will be different?

When will online selling rules change?

The UK left the European Union (EU) on 31 January 2020. This marked the start of an 11-month transition period that will last until 1 January 2021, while the UK and EU try to negotiate a new comprehensive trade agreement.

Until 1 January 2021, existing rules allowing free movement of people and goods between EU countries and the UK will remain unchanged. The UK will also stay within the EU VAT regime during the transition period.

In early March, senior UK government figures said the UK is prepared to walk away from trade talks with the EU as soon as June 2020, if a broad outline of a comprehensive free trade agreement between the UK and EU had not been agreed. EU representatives have described it as “virtually impossible” to create such a deal in just 11 months, if the UK diverges away completely from EU laws, rules and regulations, which is the UK government’s stated aim.

How could trade rules change post-Brexit?

The UK government wants a “Canada-style” trading relationship with the EU. That would mean few tariffs (ie taxes on imports) applied to goods traded between the EU and UK. Quotas would be higher, too, allowing goods to be exported in greater volume without extra charges being levied.  

If no such agreement can be reached, the UK and EU would trade on WTO rules, which would see tariffs and lower quotas introduced on some goods.

Some goods sold by UK-based online sellers to EU customers could attract import duties, determined by the future trade agreement.

VAT rules and procedures will change and there are could also be additional administration and customs charges that will push up prices or eat into the established margins of UK-based online sellers. This could be eased somewhat by the pound’s weaker value against the euro, making buying from UK-based sellers more attractive to EU customers, which could boost online sales made by UK sellers.

Nothing has yet been decided, but we already know how some things will change post Brexit transition period for those in the UK who sell online to customers in the EU.

How many UK businesses will be affected?

  • Portrait view of focused serious middle aged professional female carpentry working with an electric drill in the workshop.

    The UK exported £291bn of goods and services to other EU countries in 2018, amounting to 45% of all UK exports.

  • Young startup entrepreneur small business owner working at home, packaging and delivery situation.

    E-commerce sales by (non-financial sector) businesses in the UK were worth £688bn in 2018 (most recent available figures) – an 18% increase on 2017’s total of £582bn.

  • Person on laptop

    Online sales now account for almost a fifth of all retail sales made by UK businesses (source: ONS).

  • Skyscraper Business Office, Corporate building in London City, England, UK

    Almost half (47%) of UK businesses with 1,000 or more employees sell online, while 20.5% of businesses with 10 or more staff sell online. Only 12% of UK micro businesses (ie those with fewer than 10 employees) sell online. Overall, about 13% of UK business sell online.

  • Desk with people working on laptops

    The UK is an ecommerce leader. More than 35,ooo micro-businesses in the UK have been estimated to sell online to customers in the EU.

How will VAT rules change for UK online sellers?

Currently, goods exported by UK businesses to EU consumers have either UK or EU VAT charged, subject to distance selling thresholds. After the transition period, EU distance selling arrangements won’t apply. UK sales to EU consumers will be zero-rated for UK VAT purposes, but EU import VAT and customs duties will apply (in the absence of a trade agreement preventing this).

UK-based online sellers of goods to consumers in EU countries will no longer be able to declare and pay VAT via their UK VAT return in countries where they are below the annual distance selling threshold (€35,000 a year per country for most EU nations, except the Netherlands, Luxembourg and Germany, where it is €100,000). UK sellers will either have to register in each country where they sell and pay local VAT on VAT-able goods, or block customers in some or all EU countries.

Alternatively, a seller could set up a presence and hold stock in an EU country.

They would need to register for VAT in that country, but they would then be able to gain from the EU VAT threshold when selling to customers in EU countries. And, only one new VAT registration would be required, rather than several, which would otherwise be the case.

The potential increase in online spending

Consumer spending habits are likely to change over the coming years. Online sales are increasing every year and this has been further accelerated by the Covid-19 pandemic. It is quite likely that Brexit will also lead to more consumers shopping online. With the high street in trouble and the economy in recession, consumers will be looking for the competitive pricing offered by online retailers. 

However, as we’ve highlighted, the UK being outside of the EU will create complications for businesses and consumers alike. The scope of these complications is unclear whilst there is no trade agreement, but a negative outcome will clearly have an impact on online retailers. 

What about B2B online sales?

Currently, VAT is charged on most goods and services sold within the UK and the EU. Goods exported by UK businesses to non-EU countries and EU businesses are zero-rated (those exported to EU consumers have either UK or EU VAT charged).

If a new trade deal isn’t agreed between the EU and UK, sales of goods to EU businesses will continue to be zero-rated (supporting exporting documentation must be retained), but UK businesses will no longer have to complete EU Sales Lists. They won’t be able to take advantage of VAT compliance simplifications on their EU sales.

What if I sell digital services to EU consumers?

Currently, for services, “place of supply” rules determine the country in which you charge and account for VAT.

Once the Brexit transition period is over, if you sell digital services to EU customers, you’ll no longer be able to use the UK’s VAT Mini One Stop Shop (MOSS) service to declare sales and pay VAT due in EU member states.

Instead, as explained on government website GOV.UK: “For sales made from 1 January 2021, you’ll need to register for either:

If you’re currently using the UK VAT MOSS service, the final return period will be the period ending 31 December 2020 and you should only include sales made before 1 January 2021 in your final return, which should be submitted by the 20 January 2021.

Lying down on bed on laptop

Does my business need to get an EORI number?

According to GOV.UK: “From 1 January 2021, you’ll need an EORI [Economic Operator Registration Identification] number that starts with GB to move goods in or out of the UK. If you already have an EORI number that starts with GB, you can continue to use it.”

You don’t normally need an EORI number if you sell services or need to move goods between Northern Ireland and the Republic of Ireland.

If you currently despatch things you sell online by post or courier, according to GOV.UK: “If you use a post or parcel company to move goods, they’ll tell you if you need an EORI number.”

But: “You’ll need an EU EORI number if your business will be making customs declarations or getting a customs decision in the EU. Get this from the customs authority in the EU country where you submit your first declaration or request your first decision.”

It only takes 10 minutes to apply for an EORI number. You’ll either get one straight away or within five working days, if HMRC needs to carry out additional checks.

Further sources of advice and information

The Chartered Institute of Taxation website provides a list of key VAT issues UK businesses should consider as a result of Brexit. Similarly, there are lists for Customs duty and Excise duty.

The above information merely highlights some changes that UK-based online sellers will need to prepare for post Brexit transition period, but it’s by no means comprehensive. Seeking tailored guidance from a tax expert who is fully up to speed with latest developments is advised.

For general advice, you can ring the government’s Business Brexit Helpline on 0300 2000 900 (Monday to Friday, 9am to 6pm).

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