If you are one of those businessmen who are active importers of goods from the UK, then you need to be aware that from 2021 onwards, the Government of England will be making subsequent changes to import VAT rules. This means that the following changes in the course of the plan will coincide with the end of the Brexit transition period.

Which imports/goods are to be impacted?

The criteria set for the deliveries are those goods whose value not exceeding £135 and is valid to those consignments arriving in Great Britain (England, Wales & Scotland) from the outside UK. This includes goods imported from both EU and non-EU countries. However, as long as Great Britain is concerned, there needs to be no distinction/issue between both parties during the transition time. On the other hand, Northern Ireland will enjoy special status in regards to VAT, in order to maintain successful trade with Ireland. In terms of goods, it will remain part of the EU, so an alternative system will be applied.

Currently, details are still onto finalization by the UK Government in writing. Let’s discuss the changes it involves:

The new rules largely apply to consignments of goods arriving into Great Britain (England, Wales & Scotland) from outside the UK, with a value not exceeding £135.
This includes goods coming from both EU and non-EU countries. As far as Great Britain is concerned, there will be no distinction between the two at the end of the transition period.
Northern Ireland will, however, have a special status with regards to VAT, in order for it to continue frictionless trade with Ireland. For goods, it will remain part of the EU, so an alternative system will apply.

The details are still being finalised by the UK Government at the time of writing.

What are the changes that involve?

Imports of value below £135

The following changes for these goods will be valid from January 2021:

•NO import VAT to be payable at the time of import for the following type of goods.
•VAT is due to be paid ONLY time when moving from point of import to point of sale.

In the facilitation of sale, online marketplaces will be entirely responsible for the collection and accountability of the VAT i.e. (the online marketplaces will act as the deemed supplier, so the overseas supplier will not have to register an account for UK VAT).

•The goods that are sent from abroad and sold directly with the UK residents/customers, without any sort of marketplace involvement are bound to register an account for the VAT to HMRC.

•Further if B2B sales take place with a UK VAT registered trader, provided that the customer is a VAT registered resident of the UK, owning a valid VAT registered number to the seller. Then in such circumstances, the VAT will be the one responsible for the customer by means of a reverse charge.

NOTE: There are different sets of rules for exercise goods and non-commercial transactions between private individuals/business owners.

Imports of a value above £135

The following changes for these goods will be valid from January 2021:

•Businesses worldwide can opt to use ‘POSTPONED VAT ACCOUNTING’ to account for import VAT on their VAT return for goods, importing from anywhere in the world.

•The following setup is as opposed to having to pay the VAT upfront, in view of recovering it at a later stage (assuming the VAT is fully recoverable). However, there could be limitations to this rule i.e. Businesses will need legal advice when making transactions specified to the goods they plan to import. This includes goods already present in the UK at the point of sale, and at online marketplaces. 

Businesses that have already been successfully established outside the UK, but have ownership of goods in the UK actively selling to UK customers are liable for the UK VAT, which means that they need to be VAT registered in the UK. 

Read Also: A guide to VAT and Commercial Property

On the other hand, online marketplaces should be well aware that from 2021, they are deemed to make the goods supplied to the customers, which clarifies that none of the overseas suppliers will be liable to be registered for UK VAT.

How can you plan for the end of the Brexit transition period?

As businesses move ahead to the end of the transition period, they should be mapping out their respective business supply chains and considering EU VAT registrations.

In addition, you should also take into consideration the following:

• Methods/procedures to import and export goods from/to the UK/EU.
• Utilise services of a customs agent to assist with declarations at the new UK/EU border.
• Possibility of unavailability of EU simplifications, for example, distant selling, triangulation,    Mini One Stop Shop.• Ensure to register yourself with an EORI number, a mandatory requirement to move goods into and out of the UK.
This is not an exhaustive list. It’s strongly recommended that you seek professional advice to prepare yourself for the necessary changes.

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