Personal tax planning in 2021/22

VAT changes should make life easier for EU traders

Our Head of VAT and Customs Michael Ashdown says two changes will be made to EU VAT legislation with effect from 1 July 2021 that should ease the administrative burden on businesses that sell goods to consumers in the EU.

All goods sent to the EU from the UK need to be officially “imported” because the UK has left the EU Single Market. VAT and sometimes duty has to be paid on these imported goods, and the charges on importation need to be paid before the goods are released.

Many consumers in the EU having purchased goods from a UK business have then been faced with a demand for VAT, duty and other charges before they can receive their goods.

The first change means that for consignments of goods valued at up to €150, the supplier will be responsible for paying the import VAT, which should mean the customer would receive their goods without having to pay any further import charges. The import VAT will be due at the rate of VAT for the country where the goods have been imported.

The supplier will not have to register for VAT in each country to pay this import VAT, as there will be a One Stop Shop procedure set up. The supplier will account for the VAT and the goods should therefore not be held up at the border. One return will be submitted, to a nominated EU country, on which the import VAT for all of the goods imported (valued at €150 or less) will be paid over, but the rate of import VAT will depend on the country into which the goods were imported. If the consignment of goods is valued at more than €150, import VAT will remain payable at the border by the importer in the current way.

The other change will affect the sales of goods to individuals in the EU that are made from a stock of goods held in the EU. Currently, once the value of such sales exceeds a threshold set by the country, it is necessary to VAT-register in that other country under the distance-selling rule.

Going forward, it will be possible to use the One Stop Shop. This will still require a business to identify where its customers are located and pay VAT at that rate on the sale of the goods but will require only one VAT registration and one VAT return.

However, if a business holds stock in a number of EU countries, it will still be required to be VAT-registered in each of these countries, so it may make sense now to amalgamate your stockholding to just one EU location. The same One Stop Shop will be able to be used to account for the import VAT on low value consignments and on EU distance sales.

These changes will mean many businesses may now be able to reduce their compliance obligations and help their EU customers by not having to make additional payments to receive goods form the UK.

We have experience of working with clients to assist them with their EU VAT obligations, so please get in touch if you require assistance in this area.

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