21 May 2021

Changes to VAT on B2C supplies within the EU after 1st July 2021, including recovery of EU VAT charged

HMRC Guidance on moving goods between GB and the EU

HM Revenue & Customs have recently sent letters to VAT-registered businesses in Great Britain trading with the EU, or the EU and the rest of the world.

They explain what businesses need to do to comply with the new rules and processes for moving goods between Great Britain and the EU, including:

  • making sure they have a UK Economic Operator Registration and Identification (EORI) number
  • ensuring they are ready to make customs declarations
  • checking if their goods are eligible for the preferential zero duty rates
  • preparing for the end of staged import controls on 1 January 2022

Click here for more about the letters to businesses about importing and exporting goods between Great Britain and the EU.

Significant VAT changes for e-Commerce from 2021

From July 2021, the way VAT is handled for online sales from businesses worldwide to consumers (B2C) in the EU is changing.

The changes, commonly referred to as the EU VAT E-commerce Package, are important, wide ranging and complex.

A high-level overview is as follows:

Distance Selling – The principle of distance selling of B2C goods between EU member states and Northern Ireland remains unchanged. However, the current thresholds of either €35,000 or €100,000 set by each EU member state (the UK uses £70,000) will be replaced with a single pan-European threshold of €10,000 (£8,818). This threshold will apply to the total cross-border sales by the business across the EU and not, as at present, on a country-by-country basis. This means businesses selling B2C goods from Northern Ireland to the EU and from the EU to Northern Ireland above the distance selling threshold will be affected by the new rules.

One Stop Shop (OSS) – To ease the administrative burden of businesses having to register in each EU member state where they have customers, there will be a new opt-in online One Stop Shop (OSS) quarterly VAT reporting and payment system. This means that businesses falling in scope of the new rules will no longer be required to VAT register in each of the EU member states of their customers. A business opting to register for OSS will be able to do so once in any EU member state or in the UK, provided that it is VAT registered in the EU member state or is trading with the EU under the Northern Ireland Protocol.

Abolition of Low Value Consignment Relief – All goods imported into the EU will be subject to VAT, and the current exemption for goods imported from outside the EU in small consignments of a value of up to €22 will be abolished.

Import One Stop Shop (IOSS) – To ease the burden on businesses having to register in each member state, where they have customers, there will be a new opt-in on-line Import One Stop Shop (IOSS) monthly VAT reporting and payment system. This means that businesses falling in scope of the new rules in respect of EU and Northern Ireland imports will not be required to register for VAT in each of the EU member states of their customers. Businesses in Great Britain that make sales of goods in consignments not exceeding £135 to customers in the EU will have the option to register for IOSS.

Online marketplaces and imports – Businesses operating e-marketplaces and other e-commerce platforms may be required to collect and pay the VAT on certain sales on their marketplace/platform.

Click here for more information about the EU VAT e-commerce package and examples of situations where the changes will apply.

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