We are a small US business that occasionally gets orders from the UK.
I am surprised by the lack of articles stating clearly what needs to be done so we can continue to ship to the UK now post Brexit. Surely we aren't the only US-based business in this position?
Has anyone found a good, clear, step-by-step guide on what we need to do in this situation?
I enjoy using Shopify but I, too, get frustrated by how difficult it is to find information from Shopify about specifics on important topics like the changes that have occured because of Brexit. I did find this useful article on Big Commerce. https://www.bigcommerce.com/blog/uk-vat/#what-do-i-need-to-do-as-a-merchant
Thanks @Stephanie_Terro that article is better than most. But this (from the article) baffles me:
For goods imported into the UK in consignments not exceeding £135 in value, VAT is now charged at the point-of-sale (i.e. during checkout) instead of at the point of importation...
The seller may pay the import VAT (and duties) on clearance and reclaim if they have a UK VAT number. Alternatively, the seller may opt to have their customer pay at customs. Only the owner of goods at the time of the import can reclaim the VAT.
Having the customer pay customs fees, duties, VAT, whatever is what we've always done. This seems to be saying that's still possible (while at the same time saying it needs to be charged at point of sale, a seeming direct contradiction...) Also, what would be the point of paying VAT and duties and then reclaiming them? Baffling.
Say we do need to collect a 20% VAT on all sales to the UK. How do we do this? What support is Shopify offering to US businesses to make this possible?
Then there's this from Shopify Help:
How do I know if I need to register to charge taxes in the UK?
Typically, you need to register if your sales in the UK sales are equal to or greater than 85,000 GBP within a 12 month period.
Now you would think that this is important information and would be included at the top of all articles on this issue, but it is not, and I haven't seen any information on what is required of US businesses who do less than this threshold in sales in the UK. We do nothing? Our customers pay no VAT? VAT is collected by UK customs?
Am I the only one who is clueless here? Is ours the only small US-based business using Shopify with a few sales in the UK?
We are also a small US business with occassional sales to the UK. I'm trying to figure this out as well. I wish there was a guide with a checklist that we could use. I'm going to contact our CPA and see if they have any guidance to offer.
In our FAQs to international customers, we state they may be responsible for duties and related costs. However, the information I have read regarding VAT states that if the proper paperwork is not in place, we risk the package being sent back. I want to avoid any potential issues.
2021 Brexit & Ecommerce News for U.S. Companies Selling to UK
As of January 1, 2021 the EU-UK Brexit Withdrawal Agreement is now in effect. The UK consists of England, Scotland, Wales and Northern Ireland, however, for customs purposes Northern Ireland will continue to follow EU customs rules. UK tax authorities, HMRC (Her Majesty's Revenue and Customs), have implemented changes on how to handle VAT.
Two new UK ecommerce reforms:
1. U.S. companies need to charge sales VAT to private consumers at point-of-sale on goods sold below £135. (This replaces paying import VAT on goods below £135 to the UK customs.)
2. Certain online marketplaces are now taking on VAT obligations for U.S. sellers.
What major changes can a U.S. company expect when selling products to the UK? Let’s delve a little bit deeper, here are a few questions for U.S. sellers when selling online to private consumers in the UK:
1. Is your sale above or below £135 GBP (around $180 USD in today’s rate)?
If your sale is below £135 GBP:
As of January 1, 2021 all imports are subject to 20% UK VAT. There is no longer a VAT exemption for “Low Value Consignment Stock” relief, so your U.S. company needs to start charging VAT to your UK private consumers. Yes that is right, for any product priced £1-£135 GBP you need to add 20% UK VAT. This means a non-UK resident seller must add 20% VAT at the point of sale on their website checkout. For example, if you are selling something for $10 you need to add $2 VAT and thereby the total charge is $12 at checkout. The $2 collected in VAT needs to be reported and paid into HMRC. Charging VAT in the UK – legally requires a UK VAT registration. Your team at EuroVAT is happy to assist with VAT registration, reporting and filing materials.
If your sale is above £135 GBP:
Goods above this value are subject to import VAT and duty at customs. No new change to this rule, but the tricky part now becomes to keep track of currency exchange rates at each time of sale. For example, if your product price is $180 USD some days you might be above £135 GBP and other days below. The £135 threshold is based on the intrinsic value of the goods, excluding transport, insurance and other import taxes.
If your imported goods are valued above £135 (or multiple goods with a combined intrinsic value above £135) then you as a U.S. seller still have the option to make your private consumer pay for VAT to customs. In other words, when you sell the product you inform that they are responsible for importing the goods and have to pay duty + 20% VAT to customs.
Another option, would be for your U.S. company to register for a UK VAT number and pay duty and 20% import VAT. You still need to collect VAT from your private consumers and report taxes quarterly to the UK. Either way, it is advisable for companies with sales to private individuals in the UK to look into UK VAT registration. Please contact EuroVAT at firstname.lastname@example.org to explore your VAT options.
2. Are you selling from an online marketplace located in the UK?
If your online marketplace is handling fulfillment (ex. Amazon) and your product is sold within the UK by overseas sellers, this type of marketplace becomes responsible for charging and reporting VAT. A marketplace facilitated sale can mean that the sales platform authorizes the payment to the private consumer, or sets the general terms and conditions of the sale, or participates in ordering or delivering the goods.
For any “marketplace facilitated” sale of any value made by a U.S. company where the goods where already located in the UK, the marketplace also becomes responsible for the VAT. This means that the marketplace will collect the VAT from the individuals, and pay it to the UK tax authorities. Note that your U.S. company still needs to be the importer of the product to the UK, and you still need to be registered for VAT in the UK, so you can claim back the import VAT paid to the UK customs.
However, if your marketplace is just a “storefront” (ex. Shopify) and they are not handling fulfillment or they do not receive payment directly from your private consumers or a few other exceptions – you are still responsible for VAT. This type of platform only lists or advertises the product, or redirects/transfers customers to other electronic interfaces where goods are offered for sale, without further intervention.
Additional questions to consider:
-Who will be the importer of record? You or your private consumers?
-Do you have a UK EORI number? Or only an EORI valid in the EU?
-Are you using an EU MOSS number? Do you need a UK MOSS?
-Are you using the UK in a triangulation? You can no longer include UK.
-Are you buying or selling services? No change but slight modifications for B2C.
-Selling in Northern Ireland? Reforms are only partially applicable to Northern Ireland.
Please contact EuroVAT and ask about your case to find out what specific rules apply - we are happy to provide our comments. Please email vat at eurovat com with your questions regarding VAT in the UK and the EU-UK Brexit Withdrawal Agreement.
Dean and Stephanie,
We are located in Los Angeles and we are having a free zoom webinar on March 10 about this! You should join us! Here is the invite:
Please join us for a complimentary Zoom webinar:
Value Added Tax When Selling Products Online to Europe
Wednesday, March 10 at 11:00am PST / 2:00pm EST
This webinar is designed for U.S. and Canadian companies
selling products to the EU and/or the UK
either on their own website or
through Amazon, Ebay, Shopify, and other sites.
Euro VAT Refund's CEO, Britta Eriksson
provides breaking news regarding January 2021 UK rules
and expert insights on how to prepare for
the new EU laws for ecommerce starting July 2021
During this webinar you will learn:
• How to choose countries for VAT registration
To register and receive your zoom log-in link please email:
or you can try emailing me directly bianca dot blake at eurovat dot com
I also posted an article we just wrote about this below.
We are happy to help answer questions.
Euro VAT Refund, Inc. · 5161 Overland Avenue · Culver City, CA 90230 · Phone: 310 204 0805
@BiancaBlake IIUC, Shopify says that if a US (or other) business has less than £85k in sales in the UK per year, that business doesn't need to register to charge taxes in the UK. Is that true? You don't mention it, but it seems very important for small businesses.
Thanks for the information, and for the webinar invitation.
"The £85,000 VAT registration threshold only applies to UK-based businesses selling within the UK."
So yeah unfortunately, the less than £85k in sales in the UK per year only applies to UK companies. It does not apply to companies outside the UK such as an U.S. company. If a U.S. company sells products where the sale is below approx $180 USD they need to register for VAT in the UK from day one.
I know... don't shoot the messenger.
Have a good weekend,
There’s no threshold if neither you nor your business is based in the UK. You must register as soon as you supply any goods and services to the UK (or if you expect to in the next 30 days).
My solution is going to be to not sell to UK customers, so how to do that will be my next question. Imposing this burden on small (<£135) sales into the UK, and having an easier process (bill to customer) for sales above that threshold seems ridiculous to me. Maybe it'll be changed in the future.