Got a No Deal Brexit? Get a Package of Problems!
If the UK leaves the EU without a deal, some important changes are being put forward by HMRC about the tax paid for parcels from abroad. These changes would affect most of us, whether we run a business or buy goods as individuals.
If There’s a Parcel, There’s a Charge!
At the moment, there’s a £15 rule. This says that if the value of your parcel is not more than £15 then neither seller nor buyer pays any UK VAT Import Duty. This rule covers many small items bought from non-EU countries via websites like eBay and Amazon, for instance.
This £15 rule will disappear, so if you receive an item from say China worth £10, the seller will have to pay UK VAT Import Duty. The same goes for anything coming from the rest of the world, excluding the Republic of Ireland, where specific rules will apply. The chances are the sellers will pass this cost on to UK buyers otherwise their profit is reduced.
There will also be separate rules for alcohol, tobacco and perfume under Excise Duty arrangements.
When Does the Buyer Start Paying?
The VAT Import Duty is paid by the seller if the value is £135 or less. If more than £135 it is payable by YOU, the buyer, but the seller can collect this on your behalf. If not, you have to register for this with HMRC, even if you are not a business. If you don’t register the only guidance so far is that your parcel may well be delayed. Hopefully, this will not occur often, as couriers will also be able to collect the Duty on behalf of Buyers.
If the VAT Import Duty is introduced, it may discourage some worldwide offshore sellers from selling low-value goods to the UK, and discourage some UK buyers from buying items exceeding £135 in value.
Does this mean they will buy instead from UK retailers? Not necessarily, although the UK Government, according to HMRC, is doing this to prevent UK retailers from being undercut by VAT-free goods from entering the market.
This also raises further questions about the integrity of some offshore sellers. For example, if goods are advertised by an offshore seller for whatever value, how do we know that the seller has registered legitimately with HMRC? If parcels arrive at the UK without a valid registration number, they may be delayed, and who will pay the VAT duty?
The HMRC “Key Messages” document is short on detail for UK buyers of parcels exceeding £135 in value. Presumably, HMRC is hoping that most sellers will pay the VAT Import Duty regardless of the value of the parcel.
The HMRC Line is…
“There will be two ways for sellers outside the UK to pay the UK import VAT on parcels to the UK HM Revenue and Customs (HMRC). Sellers can register for the UK HMRC new online service and are encouraged to do so now so they are ready to use it if the changes are introduced. Alternatively, they can pay a parcel operator that offers a service to pay the UK import VAT to HMRC on the sellers’ behalf.”
And:
“If sellers do not follow the new UK import VAT rules, parcels may be delayed or stopped from entering the UK. In addition, the UK buyer may have to pay extra tax and fees, and the seller may have to pay a penalty of £1,000.”