Attention all direct to consumer ecommerce brands! The UK Government is moving forward on January 1, 2021 with some major changes that will impact how you currently sell and ship to the UK. For starters, starting on January 1, 2021 you will have to have a UK VAT registration number to continue accepting orders and shipping to the UK. The VAT change coincides with the end of the Brexit transition period. However the changes are also in line with similar VAT changes that the EU is moving forward with on July 1, 2021.
What is changing?
New VAT Registration and Compliance Requirements for DTC Brands
The UK Government is introducing a new VAT model for cross-border goods that requires all ecommerce merchants that ship to the UK to register for a VAT number by Jan 1, 2021 and become the responsible party for collecting and remitting VAT. Today the shipping company (be it Passport or DHL) is responsible for paying VAT and duties at the border.
Who pays VAT and How is It Collected
For orders under £135, the ecommerce merchant will become responsible for collecting and remitting VAT to the UK government. Your international shipping carrier or 3PL will no longer be responsible for paying VAT at the border for these types of orders.
For orders over £135, it will be business as usual and the VAT will still be due at the point of importation (rather than at the point of sales as with orders under £135). Ecommerce merchants will not be responsible for paying the VAT on these types of orders to the UK government.
The UK Government is removing the current de minimis of £15 and will require VAT on every order entering the country.
Sales through a marketplace like Amazon or eBay
Marketplaces will now be responsible for collecting and remitting VAT for orders under £135. Analogous to the Direct to Consumer ecommerce seller, a marketplace such as Amazon, eBay or Etsy will be considered the “seller” of the goods and will have to report marketplace sales on their UK VAT filings.
These rule changes are right around the corner and awareness is the first step to a successful transition to the new post-Brexit world!