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UK 27,000 e-retailers face £772m Brexit VAT compliance bill

  • Apr 12, 2018 | Richard Asquith

UK 27,000 e-retailers face £772m Brexit VAT compliance bill

An estimated 27,040 UK small companies selling goods online across the European Union could face an annual £772m VAT compliance bill after Brexit.

In a survey of 989 small e-retailers, VAT technology firm, Avalara, estimated the cost per company of new EU VAT registration and returns obligations at €28,568 p.a. for each business.

Micro-businesses lose EU VAT distance selling threshold relief

Currently, most small e-retailers, selling on their own websites or through Amazon and eBay, do not have to register for VAT in other EU states if their local sales are under the local registration threshold.  This means they are not required to VAT register in each EU country where they are selling, but can instead charge UK 20% VAT and pay the tax collected to HMRC. Once over the national VAT distance selling thresholds, ranging between €35,000 and €100,000 p.a., they must instead VAT register, file and pay to the different countries.

Following Brexit, UK companies will lose this relief. They will instead have to immediately register for VAT in each country where they are selling, and file each month under the local national laws and VAT returns. Small UK e-retailers are going to be hit by new administrative hurdles and costs in order to continue trading. This may prove off-putting, and lead to geo-blocking of customers from mainland Europe.

None of the future trading relationships so far raised by the EU or UK in the Brexit negotiations have included retaining this relief for online merchants.”

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Need help with your UK VAT compliance?

Researching UK VAT legislation is the first step to understanding your VAT compliance needs. Avalara has a range of solutions that can help your business depending on where and how you trade. 

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VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which won International Tax Review's 2020 Tax Technology Firm of the Year. Richard trained as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.