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Shipping to the UK after Brexit 2021
Starting January 1, 2021, shipping to the UK will be more complex due to Brexit. The UK has implemented new rules for goods imported into the UK. The biggest change is the requirement to collect VAT on shipments to the UK. (I honestly think Brexit is just being used as an excuse for this)
The UK is taking these actions to ensure that UK businesses are not disadvantaged by competition from VAT free imports. (Wouldn't be VAT free if customs did their job!)
Failure to adhere to UK Customs procedures could result in:
• Parcels being refused entry into the UK by customs
• Parcels being returned to sender (including return shipping fees depending on carrier used)
• Parcels and products being destroyed (my personal favorite)
• Parcels incurring major delays in being delivered to buyer
• Parcels generating additional shipping and/or customs fees, or penalties
What You Need to Know:
You Must Register for VAT and Collect VAT Fees
As a U.S. online retailer, you will now be required to create an online account with Her Majesty's Revenue and Customs (HMRC) and register for a VAT number in order to deliver e-commerce orders to the UK. You will be required to collect all VAT fees from your buyers at time of product purchase. This VAT fee was previously collected when a parcel entered the UK, typically with the buyer having to pay VAT to release the package from Customs.
VAT rates vary dependent on product price:
Most Goods and Services valued UNDER £135 have a 20% VAT Rate
Goods and services shipped to the UK with a value between £0.01 and £135 will incur VAT fee of 20% of the product price not including shipping fees. U.S. online retailers selling products to UK buyers are require to collect this 20% VAT fee at the time of sale. Online retailers will be responsible to pay all VAT collected to HMRC every three months.
VAT for Goods and Services valued OVER £135
All shipments with goods and services valued higher than £135 will be subject to the current VAT procedures, which state VAT is payable as the parcels are being imported into the UK. These types of packages are often cleared through customs via parcel consolidators and all applicable duties and VAT will be paid to HMRC directly by the parcel consolidator, who then normally invoices the online retailer.
What You Need to Do:
Create a UK Government Gateway Account
Create an account with Her Majesty's Revenue and Customs (HMRC). This done easily online at: https://www.gov.uk/log-in-register-hmrc-online-services
Register for a VAT number
After creating a UK Government Gateway Account, use your Government Gateway ID and Password to register with HMRC for a VAT number: https://www.gov.uk/vat-registration/how-to-register
Make Quarterly VAT Return Payments to HMRC
Online retailers must report and pay the VAT Return (taxes) collected from their online sales each quarter to HMRC. You can find your actual deadline inside your VAT online account, but in general the deadline for HMRC’s bank to receive payment is one calendar month plus 7 days after the end of the accounting period (annual quarter). If your VAT Return payment is late, you could be liable for additional late fees.
To submit your VAT Return, you can use HMRC’s free online service or one of the many commercial accounting software platforms that HMRC has partnered with. The approved software list includes many popular solutions such as QuickBooks Online, Sage Business Cloud and SAP. (I use Sage and this would be a HUGE bump in annual cost for their bugware)
Your quarterly VAT Return should include key data points for your UK sales such as:
• Total sales and purchases for your account (only orders delivered to UK)
• The amount of VAT you owe from your UK sales
• The amount of VAT you can reclaim (i.e. order returns, product defects)
• The amount of VAT refund due from HRMC