Ecommerce in the UK and EU region will be affected following the Brexit starting this coming year, January 1, 2021. Sellers to and from the UK should expect new regulations, duties, customs and other obligations to meet which resulted from Brexit.
If you are selling to and from the UK (or if you are selling from the UK to EU), you should learn the new rules and prepare for it before they are implemented. Otherwise, you may experience problems such as blocked shipments at customs, possible fines and annoyed customers.
How Brexit Will Affect Your Ecommerce Business
Brexit will directly impact merchants selling from and to the UK by reinstating a customs border between the EU and the GB and by introducing new VAT rules for goods imported into the UK.
If you are selling to and from the UK, Brexit will affect your e-commerce business by re-establishing a customs border between the Great Britain (GB) and the European Union (EU). Brexit will also affect your store by adding new VAT regulations for any goods imported to the UK.
Depending on where you’re from and where you sell to, here’s how Brexit will affect e-commerce stores:
If you are from outside UK selling to UK
- You’ll need to collect VAT any orders sold to the UK worth below ￡135
- E-commerce businesses will need to file for VAT to HM Revenue & Customs (HMRC) on a quarterly basis.
- Any orders worth ￡135 and above are subject to import VAT and other duties.
If you are from UK selling to EU
- You are not required to collect VAT on any orders delivered from the UK to the EU as long as the EU customer will import the order.
- Buyers carry the responsibility of paying respective import VAT and duties for their orders.
- Customs documents will be asked by respective authorities with orders that are being delivered to the EU.
How to Prepare for Brexit E-Commerce
Although the changes being made to regulations within the UK-EU region sounds confusing, getting prepared ahead of the time is key to manage these changes. Here’s what you can do to prepare for Brexit’s effect on e-commerce:
1) Apply for VAT whenever applicable
If you sell to the UK and ship orders below ￡135, you will need to register your store for VAT purposes at the HM Revenue and Customs (HMRC). However, this rule does not apply to goods delivered from the UK to any parts of the EU except if the goods or products specifically comes from Northern Ireland.
If you are not sure about the new VAT rules, contact a tax professional or authority in your country of sale to give you advice on the matter.
2) Adjust your tax rates
Depending on where you’re from and where you’re selling to, you may need to adjust your tax rates to ensure that you’ll profit after the new VAT regulations. Otherwise, you may find yourself losing money due to the new VAT rule.
3) Prepare for Brexit customs
Apply for a UK and EU EORI number to clear goods: Regardless of where your business is based if you sell into the UK and/or the EU, you’ll need two Economic Operator Registration and Identification (EORI) numbers: a UK EORI (register for one with HM Revenue and Customs) and an EU EORI. Used on customs declarations, an EORI number uniquely identifies the exporter in customs procedures and documentation.
Regardless of where you’re from – UK, EU or anywhere in the world – if you are selling on UK and/or EU, you’ll need two EORI numbers: EU EORI and UK EORI. These are used on customs declaration for identification and documentation purposes.
Here’s the information needed during customs declaration and compliance:
- EORI number
- VAT registration ID
- Amount of VAT collected on your goods
- Country of origin, harmonized code, description and the total value of each product in your shipment.
4) Review your shipping options
Shipments between the UK and EU will be subject to customs starting Jan 1, 2021. There are two options available to your business when it comes to dealing with customs fees:
Imports and exports between the EU and UK will be subjected to customs borders by January 1, 2021. Depending on the new customs rules, be sure to update your shipping options based on the location of your delivery.
Here are two options you have when it comes to customs fees:
Delivered Duty Paid (DDP): you are responsible for any import costs and your customer don’t need to pay for any fees regarding the shipment of the product.
Delivered at Place (DAP): You only need to ship the product and the customer has to pay for any import fees.
5) Update your shipping and return/refund policy
Finally, be sure to update your shipping and return/refund policy as you see fit for your business.
Based on the new rules, let your customers know which shipping policy is applicable to them – if it’s DAP or DDP. If it’s DDP, let them know that you are collecting import and customs fees on their behalf.
Also, let them know if the customs fees are refundable or not. While it’s possible to have them refunded, this policy is always not clear.