UK marketplaces Brexit VAT liabilities
- Jan 1, 2021 | Richard Asquith
Marketplaces trading in the UK face a triple tsunami of customs obligations and VAT charges following the UK's departure from the EU VAT regime from 1 January 2021. These arise from the end of the Brexit transition period, and HMRC’s new rules on imports and cross-border marketplace VAT liabilities.
Failing to understand the new 2021 rules for marketplaces and their sellers will mean:
- Major import tax costs and fines;
Goods held-up at ports; and
- Upset customers.
What are marketplaces’ 2021 hazards?
||Risks||Impact for marketplaces|
|1. UK left the EU Customs Union and VAT regime||UK or foreign sellers now incur import VAT for the first time on imports into the UK or into the EU from the UK. Most sellers have no experience of the customs declarations, commodity code or tariff calculation requirements.||Nasty delays and hefty tariff charges for marketplace customers. There is a real risk that these customers will not come back!|
|2.VAT on all imports to the UK||HRMC has withdrawn the £15 VAT-free threshold on goods sold from outside the UK to UK consumers. Instead, sellers (and marketplaces) have to charge VAT at the checkout on imported sales not exceeding £135. Sales above this pay UK import VAT as previously.||If the seller fails to do this, customs will return the goods or impose an unpleasant tax bill on the customer. Again, a terrible customer experience.|
|3. Marketplaces take on VAT obligations||HMRC now require marketplaces to become the deemed supplier for some imported sales not exceeding £135. This means the marketplace must calculate any tariffs and VAT, and bill the customer in checkout. Marketplaces are also VAT liable for facilitated sales of any value by their non-UK sellers.||Failure to do so will result in goods being blocked at UK ports, with frustrated customers and sellers. The marketplace will also be censured and potentially fined by HMRC.|
Avalara’s fully automated solutions for ecommerce VAT will cut friction, keep sales transactions flowing for marketplaces:
• Avalara can simply integrate its fully automated import VAT and tariff calc tool into the marketplace UI and checkout to get the new taxes right in real time. This ensures there are no additional nasty charges on unsuspecting customers.
- Our dynamic HS commodity code tools mean that whoever is responsible for clearing the goods into the UK or EU gets it right and avoids customs hold-ups.
- We can provide fully integrated, white-labelled or simple outsourced VAT reporting for the new HMRC import regime. This means marketplaces or sellers are not blocked by HMRC and the customer’s choice or experience is not jeopardised.
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.