We recently reported a story on the UK government making “postal packet regulations” directly impacting sellers outside the UK, in the event that the UK leaves the EU bloc without a deal. HMRC has now published a toolkit outlining the expected changes to the UK import VAT rules.
If this scenario comes to pass, (see our story on the current Brexit timescales) imports from the EU will generally be subject to the existing rules for imports of goods from non-EU countries. What this means is that businesses, when acting as the importer of record, will be liable for import VAT at the time of importation.
Under the new rules:
If the parcel of goods has a value of no more than £135, sellers outside the UK must pay the UK import VAT for parcels delivered to UK buyers. This applies also if the goods are sold prior to parcel delivery.
This includes any parcels valued at £15 or less as they will no longer be eligible for the existing low value consignment relief. The UK has taken this step to help level the playing field between UK and overseas retailers and is following the global trend to remove this tax exemption.
Overseas sellers will be able to comply with their import VAT obligations by:
- Registering on HMRC’s recently launched online service to account for the due UK import; or
- Paying a parcel operator offering a service fee to pay the import VAT to HMRC on their behalf.
Suppliers will be required to have registered for import VAT with HMRC from the date they dispatch their first qualifying importation.
If the parcel of goods has a value of at least £135, UK buyers will need to pay the UK import VAT. This is identical to the current import VAT rules applicable to goods worth more than £135 sent to UK buyers from sellers outside the EU.
If foreign sellers sell goods both above and below the £135 threshold to UK buyers, the seller is only required to report and pay the UK import VAT on parcels containing goods worth up to and including £135.
It is expected however that the seller can opt to act as the importer of record in all instances and pay import VAT as per the current import VAT rules if they are imported outside of the parcel regime with a completed SAD. This will be particularly beneficial if the seller is already registered for UK VAT.
If you are affected by this development or are seeking advice on how Brexit will affect your business, please do contact us.