IOSS one year on: is your business benefiting?
As news headlines across the world continue to report on rising rates of inflation, research from Cebr, commissioned by Avalara, deals another blow for UK e-commerce businesses.
Introduced on the 1st July 2021, the EU VAT reforms included the creation of Import One Stop Shop, an online system for e-commerce firms selling into the EU from outside the block to report and pay VAT. In the 12 months since the launch of IOSS UK businesses could have realised an estimated additional £5.2 billion in revenue from exports - an average increase of 10.8% on total EU exports - had last July’s EU e-commerce VAT reform come earlier in the year.
Despite this startling figure, the research also highlights the many benefits of the scheme. The study found that UK businesses have seen a 94% rise in positive customer feedback as well as a far simpler export process. At a time when consumers are in the driving seat with regards to where they spend their hard-earned money, increased satisfaction equates to customer loyalty. And, in the longer term, revenues increased by 4.2% due to the changes implemented on July 1st, 2021, relative to the first two quarters of 2021.
Unfortunately, though, many businesses are still missing out on benefits. 23% of firms surveyed remain unaware of the scheme with 93% citing that the transition harmed their businesses to some extent as they struggled with understanding the requirements and the IOSS registration process.
Based on this, if the reform had come 6 months earlier, exporters could have recovered almost £5.2 billion from exports that did not occur due to administrative complexity, meaning the revenue gained could have been 10.8% higher if e-commerce VAT reform had been introduced at the start of 2021.
Alex Baulf, Senior Director of Global Indirect Tax at Avalara, said: “This time last year, the questions on exporters’ minds were ‘what does this mean for me, and what do I need to do to stay compliant?’ A year later, we’re seeing that conversation move on, with many businesses adapting successfully to the changes and now reaping the long-term benefits - including an improvement in customer services from a smoother export process. Yet, many UK businesses still remain tied to older methods of reporting and navigating the EU border, whilst others aren’t aware of the IOSS simplification at all. It is crucial that any exporter or business looking to expand overseas embraces the reforms. Working with third parties to support the transition will help relieve the administrative burden and allow leaders to focus on what matters - unlocking the benefits to drive growth abroad”.
If you would like to find out how to register or are keen to make sure your business is taking full advantage of the scheme, find out more about IOSS, or contact us today for a no-obligation conversation with one of our team of specialists.
Stay up to date
Sign up today for our free newsletter and receive the latest indirect tax updates impacting businesses selling internationally straight to your inbox.