Businesses in the UK face quite a challenge!
They are forced to fill custom declaration forms for their products, both new as well as those returned from Europe. Depending on a product’s country of origin, and overall value, customers may need to pay VAT or customs.
Yes, the customers are supposed to pay for these customs, not the retailers. This might be the only silver-lining as these aren’t accepted in advance, you can only pay them once the product reaches the UK.
New Rules and Regulations
Under these changes, everyone living in the UK will now have to pay an import VAT bill if they receive something from the EU valuing more than £39. As a general rule, items will be charged at 20% of their market value.
If the product costs £135 or more, then you will also have to pay customs duties. It will probably cost you 0%-25% of the product’s market value if the sender didn’t pay it already.
Customers will have to pay these extra charges before receiving their product. Don’t worry, the courier will collect it on the government’s behalf.
In light of the VAT changes, retailers in EU might halt their deliveries to UK considering these changes are already implemented as of 1st January 2021.
While some companies are halting their deliveries, like Dutch Bike Bits (A bicycle parts company), and Beer on Web (Belgium Brand), some companies responded by implementing extra charges.
Labeled as “Handling Fees”, companies started to impose these additional charges on their customers to cover the extra custom costs and paperwork. An excellent example, Royal Mail has started charging a fee of £8 to clear an item through customs and for presenting them in front of the Border Force.
Meanwhile, DHL will charge customers 2.5% of the total amount to the same, costing the consumer an extra £11 minimum. TNT, another mail and freight company will charge £4.31 for every shipment between the EU and UK. These increased prices reflect their investment to make adjustments and continue operating Post-Brexit.
A spokeswoman on behalf of Logistics UK said to BBC, “These handling fees are a commercial decision taken by individual business”. On Contrary, Senior Manager of Accountants UHY Hacker Young, Michelle Dale expressed their concerns over the ongoing inflation and said it could become a problem for businesses soon.
She further added, “I believe that these rules will have negative implications on business and trade with EU, especially from the consumer’s narrative unless these rules and regulations show some leniency”.
What You Should Know?
- The rights of UK-based customers got more complicated when receiving gifts or buying online from the EU, which could lead to more disputes. Customers will have to pay all additional changes in the shape of Handing Fee, VAT, and customs duty, sure they can apply before the delivery. However, customers will have to visit the post office and clear any remaining charges to get the item released
- According to Consumer Rights Act, Online Shoppers can return an unwanted item within 14 days, but returning a product can incur additional charges
- There are high chances of disputes arising because customers can mistake the added charges as hidden costs, and might refuse to pay them. As UK has left the EU, this dispute won’t be settled in UK courts, instead, they will fall under the jurisdiction of where the seller is from
- To avoid losing UK’s consumer base/trade, overseas sellers will need to come up with a rebate scheme that will refund some of these charges after delivery
- Additionally, packages sent from the UK to the EU will need to have some custom forms alongside them
According to a Government spokesman, “New VAT model will help categorize products from both EU and non-EU countries the same, assuring UK-based business no longer face competitive disadvantage from VAT-free imports.
“This new system looks forward to bring an additional £300M in UK tax bracket as it will keep oversea sellers from not paying VAT charges when selling products to UK marketplace. This additional income will help fund public services in the country.”
There are some expectations that these rules might change but until it does, UK based consumers might refrain buying from European sellers.