Spring and Brexit: Talking Tax
None arguably have greater potential to impact on costs and consumer satisfaction than the new rules relating to VAT.
To avoid making any costly mistakes, it's important to understand not only what's changing but when and how you can tailor your response to suit both your business and your customers.
As a cross-border specialist and broker, Spring is here to explain all that you need to know and provide you with the tools to make getting to grips with the new VAT regime easier.
As one of the basic preparations for overseas trade after Brexit, you need to make sure that your VAT registration and those of your suppliers or customers are up-to-date as soon as possible.
Businesses must supply their VAT numbers with customs declarations accompanying every single cross-border, so it's a good idea to sort it out in advance.
You can check those details quickly using something known as the VAT Information Exchange System (VIES).
Along with your local VAT number, you will be required to provide an Economic Operator Registration and Identification number (or EORI, for short), a unique code used to track goods sent to or from the EU.
Of course, managing VAT can be confusing enough without realising that there are actually three different types which don't all apply at the same time.
Import VAT is, as the name suggest, levied on goods imported from another country, whereas Supply VAT is imposed at the point at which goods are sold. Furthermore, each EU member state is free to set its own rate of Domestic VAT.
All three will become relevant once the UK finally breaks ties with the EU on the 31st of December this year.
However, not all of the changes which apply will come into force at the same time depending on the direction in which goods are travelling.
A VAT exemption for items worth less than £15 (€22) is being scrapped on the 1st of January for packages sent to the UK from EU member states. In its place, there will be a simplified declaration process for goods costing up to £135 (€150), although VAT will be calculated from the first cent or penny.
VAT sent either to or from the UK will also become payable on samples or 'gifts' worth more than €45 (£39).
The scrapping of the exemption for low-value items and the simplified customs system for goods costing up to €150 (£135) will apply to products sent to the EU from the UK from the 1st of July.
In addition, excise duties will be levied on goods travelling both ways which are worth in excess of that figure.
It is worth pointing out that certain items, such as child car seats or children's clothes, carry reduced rates of VAT.
The post-Brexit VAT arrangements do not just affect goods of a particular value. They also impact on who is responsible for paying the tax.
From the very first day after the transition period ends on the 31st of December this year, the Supply VAT liable on the sale of products below the €150 (£135) threshold will be recovered from retailers.
If the sales were facilitated by online marketplaces, such as eBay or Amazon, they will be responsible for declaring and making the appropriate VAT payment.
For more expensive items, two different types of duty payment can apply.
Consumers can either pay the VAT once their purchases have cleared customs (Delivered At Place or DAP) or at a retailer's online checkout (Delivered Duty Paid or DDP). In the latter case, the seller becomes responsible for ensuring that VAT is calculated and paid to local tax authorities.
If you haven't made the process clear enough, some consumers might consider a doorstep charge the kind of unexpected surprise which deters them from buying from you again in future.
Therefore, you need to be sure about which method - DDP or DAP - is best for you and the people who buy from you.
There is a couple of ways to avoid getting tangled up in red tape, taxes and unfamiliar terminology.
Due to our lengthy experience in dealing with cross-border deliveries, Spring has created a Landed Costs Calculator to enable you to work out the right taxes for every one of your foreign shipments.
You can also call your local Spring sales contact. They know that the needs of every business are different, so can guide you through the necessary steps and come up with a very personal solution.
After all, we are Spring. We listen, we inspire and we deliver.
For further information contact your Account Manager or email firstname.lastname@example.org