The EU VAT e-commerce package was introduced on 1 July 2021. HMRC Help and Support recently issued a bulletin detailing the EU VAT e-commerce package, the UK VAT e-commerce systems and details of Postponed VAT Accounting. This blog covers the details in the HMRC bulletin.
EU VAT e-commerce package (details taken directly from the HMRC bulletin in June)
Q1. Who is affected by the EU VAT e-commerce package that will be introduced on 1 July 2021?
The e-commerce changes will affect you if you are:
- Supplying goods from Northern Ireland to non-VAT registered consumers in the EU.
- Supplying goods from the EU to non-VAT registered consumers in Northern Ireland.
- Sending ‘low value’ goods to Northern Ireland (or the EU) from outside the EU and Northern Ireland (including from Great Britain, England, Scotland and Wales).
- Under certain circumstances, online marketplaces that are facilitating transactions, will also be affected.
Q2. What are the changes that are being introduced in the EU VAT e-commerce package?
The EU’s e-commerce package, which starts on 1 July 2021, will mean changes to the Business to Consumer (B2C) sale of goods between Northern Ireland and the EU, and the import of ‘low value’ B2C goods into the EU or Northern Ireland from outside the EU.
Overview of changes:
- A new single EU-wide threshold of £8,818 (€10,000) will be introduced for the B2C sale of goods in the EU. The threshold only applies to sales of B2C goods to and from Northern Ireland, which means that suppliers sending goods from the EU to consumers in Northern Ireland who exceed the threshold will have to account for UK VAT in the United Kingdom
- Online marketplaces will be liable for collecting and accounting for VAT on goods supplied to consumers in Northern Ireland, under certain circumstances
- The EU will remove low value consignment relief (LVCR) on imported goods, which relieves import VAT on consignments of goods of up to €22. LVCR was removed in Northern Ireland on 1 January 2021 in line with wider UK reforms
- Two new EU-wide IT systems will be introduced: one for the declaration and payment of VAT on imports of low value consignments (IOSS); and the other for the declaration and payment of VAT on B2C sales of goods within the EU (OSS). Both systems are designed to reduce administrative burdens on business and to facilitate the collection of VAT across the EU
- For goods sent from Great Britain to Northern Ireland via an online marketplace that is registered for IOSS, the online marketplace will be liable for payment of VAT on non-excise goods in consignments not exceeding an intrinsic value of €150, rather than the seller.
Q3. What are the One Stop Shop and Import One Stop Shop, and why are they being introduced?
To support UK traders, HMRC will introduce two new VAT e-commerce IT systems to link with the new EU-wide IT systems.
The One Stop Shop (OSS) will be introduced to reduce the administrative burden on businesses.
The new opt-in online One Stop Shop will provide traders with a quarterly VAT reporting and payment system and allows you to register for VAT electronically in a single member state for all the eligible sales of goods across any of the EU Member States. This will reduce the administrative burden on your business, as you will only have to deal with one administration, in one language, even if your sales are EU-wide.
For traders in the UK, only those who operate under the terms of the Northern Ireland Protocol, are VAT-registered and sell goods that total more than £8,818 (€10,000) per year to consumers in EU Countries from Northern Ireland, are eligible to register for the One Stop Shop Union Scheme.
The One Stop Shop will be available on GOV.UK for businesses to register from 1 July 2021, additional guidance about this will follow.
The Import One Stop Shop (IOSS) is an optional VAT collection mechanism for imports of low value consignments.
The IOSS scheme is an optional accounting scheme that is available to businesses anywhere in the world importing low value non-excise goods, in consignments not exceeding £135 (€150), into the EU.
If you register for IOSS, you will need to charge and account for VAT on these supplies.
If your consignment is valued at £135 or more, then current rules continue to apply (i.e. Import VAT is due).
The IOSS system will not be available in the UK from 1 July, and until the system is fully implemented businesses can register in any EU Member State.
If you’re registered for IOSS and importing goods to Northern Ireland, you should notify HMRC of your IOSS number. Further information on how to do this will be available shortly.
Q4. What is Postponed VAT Accounting and what are the benefits?
Postponed VAT Accounting (PVA) allows UK VAT registered importers to account for and recover import VAT on their VAT return. PVA is available permanently and we expect that most businesses will choose to use it, because it provides significant cash flow benefits compared to the alternative of paying the import VAT when the goods are imported.
Q5. Do I have to use Postponed VAT Accounting if I delay my declarations?
Yes, if you are a VAT registered importer, and you delay your declarations or use a simplified customs declaration to make a declaration in your own records, you must use Postponed VAT Accounting (PVA). You’ll need to estimate the amount of import VAT to be accounted for on the VAT return covering the date you imported the goods.
If you’re not VAT registered, you must pay the import VAT on your duty deferment account when you make your supplementary declaration.
Q6. What steps should I take to benefit from Postponed VAT Accounting?
Here are some helpful steps that you should follow:
Step 1: Consider getting someone to do declarations for you, such as a Customs Agent, freight forwarder or fast parcel operator.
Step 2: Find out on this page when you must use PVA to account for import VAT on your VAT return and when it is optional.
Step 3: Find out how to:
- Account for import VAT on the customs declaration.
- Complete your VAT Return to account for import VAT.
Step 4: Talk to your tax advisor or anyone who helps you maintain your VAT records and complete your VAT return.
Step 5: Access the Customs Declaration Service to get your postponed import VAT statements that you need to complete your VAT return.
What TVision can do to help you
Please note that TVision Technology are not VAT experts, so we cannot advise on any of the changes detailed above. If you need advice on these changes, you would need to contact HMRC directly. From a software implementation point of view, we do not anticipate that Business Central will need to be updated in order to accommodate the changes. If you, however, feel that some amendments are needed to your Business Central set-up as a result of the changes, please contact us to discuss further.