The changes will apply where:
- the customer belongs in the EU
- goods are in the UK at the time of sale and
- the value of the consignment is under €150.
In these circumstance, VAT must be accounted for in the customer’s member state by the seller. There is no registration threshold for UK businesses as we are outside the EU.
Why?
The EU scrapped the low value import rules and brought in these changes to combat competition issues with non-EU countries. These rules replace the distance selling regulations for EU businesses.
For intra-EU shipments there is a €10,000 threshold before registration in other member states is required. However, this does not apply if the goods are in the UK at the time of sale or to a UK business.
How?
There is a simplification process to facilitate compliance. UK businesses can register for IOSS (Import One Stop Shop) which allows a single VAT registration for these sales. All can be reported on a single VAT return which will reflect sales for all 27 member states.
If the consignment value is in excess of €150, or the sales are made B2B, then the normal rules apply. This means the importer of record must account for import taxes. This might result in additional or multiple VAT registrations.
There are inevitably a number of reporting requirements. For example, you will be required to show the amount of VAT being charged to the customer and make monthly returns and payment to the authorities in the member state where you have registered.
Other matters
The UK introduced similar rules with effect from 1 January 2021. This required non-UK supplies to register and account for UK VAT for consignments under £135 in value.
Different rules apply to sales made via online market places. Similar rules have applied to electronically supplied services (B2C) from 1 January 2015.
What should I do?
If you are making these types of supplies, you should make an IOSS registration application in an EU member state. It is important to be aware that:
- there is no registration threshold
- the single registration scheme is not available retrospectively, and
- if you fail to submit, the scheme could be removed.
If you cannot use the scheme, you could have to make a registration application in each member state.
In the case of all VAT registrations (including IOSS), the rules of the particular member state in respect of intermediaries need to be considered. These are similar to the requirement to appoint a fiscal representative if you do not have an establishment.
The ‘takeaway’
If you supply goods B2C to Europe, you must consider the VAT changes from 1 July 2021 and ensure you are compliant.
Support and further information
Please contact your usual UHY adviser for further advice. Alternatively, please contact Sean Glancy, VAT & Indirect Taxes Partner at s.glancy@uhy-uk.com.
