Sweeping VAT reforms in the EU will affect the UK’s online retailers

Retailers that heavily rely on online sales to EU consumers need to comply with VAT reforms, which were introduced on 1 July 2021.

The new rules were originally designed to stop an estimated €7 billion in annual VAT fraud by non-EU ecommerce sellers, mainly those in China.

But after the UK left the EU at the start of the year, around 26,000 small and medium-sized ecommerce businesses in the UK also need to comply.

Those who export goods to EU customers face the biggest upheaval, with VAT exemptions for SMEs and shipments of €22 or less being removed.

James Sibley, head of international affairs at the Federation of Small Businesses, said:

“UK small firms will lose exemptions for small consignments, while those within the bloc making cross-border sales under €10,000 a year will continue to enjoy tax breaks.”

Exporters can now register for VAT in the country where they sell their goods, which the European Commission estimates will cost up to €8,000.

Exporters who use online platforms, such as Amazon or eBay, will typically account for VAT using the platform’s registration, but where goods are shipped directly they can ask the postal service to handle the VAT.

Small businesses could claim training support of up to £2,000 each through the Brexit Support Fund, but applications for this closed on 30 June 2021.

For further information on VAT reforms in the EU, please contact Alan Rolfe on 023 8046 1235.