New Brexit Rules for E-Commerce Sales to UK Starting Jan 1, 2021

Attention all direct to consumer ecommerce brands! The UK Government is moving forward on with some major changes that will impact how you currently sell and ship to the UK. For starters, you will have to have a UK VAT registration number by January 1, 2021 in order to continue accepting orders and shipping to the UK.

 

The new VAT model for cross-border goods coincides with the end of the Brexit transition period. However these changes are also in line with similar VAT changes that the EU is moving forward with on July 1, 2021.

 

 

What is changing?

  • All brands shipping to UK consumers have to register for a UK VAT number by January 1, 2021
  • Brands have to include their UK VAT number in the shipment to the UK customer
  • For orders under £135, the brand is responsible for collecting and remitting the VAT to the UK government
  • For orders over £135, it is business as usual and the shipping company is responsible for paying VAT as part of the import, customs clearance process
  • The UK Government is removing the current de minimis of £15 and will require VAT on every order entering the country

 

Do I have to include the VAT number on the invoice or on the package?

 

There will be spot checks done by UK Customs on both postal and private DDP shipments to confirm that the ecommerce merchant has a proper VAT registration. We will accept packages with no VAT numbers included, however we recommend including the VAT number on the label and/or on the invoice included the package. This will help avoid any unnecessary hold-ups of packages for UK customs review. 

 

 

What is the penalty for non-compliance (i.e., shipping packages to UK without a VAT registration)?

 

HMRC will be charging a late registration penalty equivalent to 5% of the VAT that should have been paid if the error was discovered within 9 months of the registration date. The penalty rises to 10% if the notification is within 9 to 18 months and 15% any date thereafter. In addition HMRC may charge interest on the outstanding VAT. Seizure restoration can start at 100% of the VAT involved and reduces according to the assistance provided by the taxpayer. Seizure would normally be considered if HMRC believed there was a deliberate attempt to evade VAT/Customs Duty.
 

 

What happens after I register for a UK VAT number with Passport?

 

After your registration, please allow 4-8 weeks to receive your VAT number. As long as you have submitted all documents by December 31, 2020, you will be in compliance of the new UK VAT Brexit rules. You will not need your UK VAT number until your first pay period filing around April 2021.

 

 

How do I stay in compliance with UK VAT on a regular basis?

 

Please reach out to a Passport representative to discuss your options for ongoing UK VAT compliance.

 

 

Can I still ship DDU (i.e., the VAT and duties owed by the recipient)?

 

For orders under £135, the ecommerce merchant is solely responsible for collecting and paying VAT so orders under £135 will never be held at the border and consumers will never be required to pay. 

 

For orders above £135, yes, it will still be possible to ship DDU, with the recipient being responsible for duty and VAT payment. However we do not recommend this approach due to the poor user experience of having the customer pay these costs after delivery (plus there is a £8 collection fee included).

Do I have to include the VAT number on the invoice or on the package?

 

There will be spot checks done by UK Customs on both postal and private DDP shipments to confirm that the ecommerce merchant has a proper VAT registration. We will accept packages with no VAT numbers included, however we recommend including the VAT number on the label and/or on the invoice included the package. This will help avoid any unnecessary hold-ups of packages for UK customs review. 

 

 

What is the penalty for non-compliance (i.e., shipping packages to UK without a VAT registration)?

 

HMRC will be charging a late registration penalty equivalent to 5% of the VAT that should have been paid if the error was discovered within 9 months of the registration date. The penalty rises to 10% if the notification is within 9 to 18 months and 15% any date thereafter. In addition HMRC may charge interest on the outstanding VAT. Seizure restoration can start at 100% of the VAT involved and reduces according to the assistance provided by the taxpayer. Seizure would normally be considered if HMRC believed there was a deliberate attempt to evade VAT/Customs Duty.
 

 

What happens after I register for a UK VAT number with Passport?

 

After your registration, please allow 4-8 weeks to receive your VAT number. As long as you have submitted all documents by December 31, 2020, you will be in compliance of the new UK VAT Brexit rules. You will not need your UK VAT number until your first pay period filing around April 2021.

 

 

How do I stay in compliance with UK VAT on a regular basis?

 

Please reach out to a Passport representative to discuss your options for ongoing UK VAT compliance.

 

 

Can I still ship DDU (i.e., the VAT and duties owed by the recipient)?

 

For orders under £135, the ecommerce merchant is solely responsible for collecting and paying VAT so orders under £135 will never be held at the border and consumers will never be required to pay. 

 

For orders above £135, yes, it will still be possible to ship DDU, with the recipient being responsible for duty and VAT payment. However we do not recommend this approach due to the poor user experience of having the customer pay these costs after delivery (plus there is a £8 collection fee included).

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− Passport Shipping team