The UK government has made regulations relating to the VAT liability of overseas sellers for parcels (postal packets) of a value not exceeding £135, entering the UK.
The legislation will come into force in the event of a no deal Brexit on a day to be appointed by the Treasury, under the Taxation (Cross-border Trade) Act 2018.
If the UK leaves the bloc without a deal in place, imports from the EU will be subject to the existing rules for imports of goods from non-EU countries. On a practical level this means that businesses, when acting as the importer of record, will be liable for import VAT at the time of importation.
These regulations abolish the existing low value consignment relief, which is currently applicable to parcels valued at £15 or less arriving into the U.K from third countries. This means that in the event of a hard Brexit all goods entering the UK as parcels from overseas businesses (including from the EU), will be liable to import VAT (except those that are VAT-exempt or subject to the zero-rating).
Suppliers will be required to have registered for import VAT with HMRC from the date they dispatch their first qualifying importation. They must account for the import VAT on three-monthly “postal packet” returns. The penalty for failure to register will be £ 1,000. In addition, in cases of non-compliance, recipients, online marketplaces or postal operators may be held jointly and severally liable
If you are affected by this development or are seeking advice on how Brexit will affect your business, please do contact us.