Disclaimer: You may have many different scenarios within your business, this guide is purely for informational purposes rather than tax guidance. What is described in this guide may not suit your business tax accounting needs, therefore, you should always seek tax advice from your accountant or tax adviser.
On the 1st of July 2021, the EU introduced new rules in respect to the movement of goods throughout the EU. This has a special impact on online sellers. Some online sellers will now have the option to file a VAT One Stop Shop (OSS) or VAT Import One Stop Shop (IOSS) return and there are new rules around the sale of low-value goods.
From a UK seller perspective, the following businesses will be affected:
Those supplying goods from Northern Ireland to non-VAT registered customers in the EU
Businesses making supplies of goods from an EU country to non-VAT registered customers in Northern Ireland
Any business sending low-value goods to Northern Ireland or the EU from outside of the EU and Northern Ireland. "Outside of the EU" includes England, Wales, and Scotland since Brexit.
Non-EU businesses with goods located in Northern Ireland at the point of sale
These new rules also impact online marketplaces (OMPs) that allow the following types of sales:
Online marketplaces located in Northern Ireland or the EU who allow sales by non-EU businesses to non-VAT registered customers in the EU and Northern Ireland
Online marketplaces that facilitate sales from Great Britain to consumers in the EU and Northern Ireland
Goods are determined to be low value when the consignment does not have an intrinsic value exceeding £135 or €150.
Scope of the Changes
HMRC has clarified that the intra-EU part of the e-commerce package applies to goods and some electronically supplied services throughout the EU. However, with the Northern Ireland protocol in place applying to goods only, supplies of services to or from Northern Ireland do not count towards distance selling thresholds:
Distance Selling Thresholds
Previously, different countries within the EU maintained different distance selling thresholds. Since 01-July-2021, this has been harmonized to one distance selling threshold which will be €10,000.00 or £8,818.00
This new threshold will apply to the total cross-border sales by the business across the EU zone and not on a country-by-country basis. This means that a business selling on a Business to Customer (B2C) basis from Northern Ireland to the EU and from the EU to Northern Ireland, who is also above the new threshold, will be affected by the new scheme.
One Stop Shop (OSS)
To make it easier for businesses who operate in the EU, and so that they don't always have to register in each EU country that they sell to, there will be a new option to opt in to One Stop Shop (OSS) quarterly VAT returns. This means that a business that falls into the scope of the new VAT scheme won't be required to register in every individual country in the EU. Instead, they can register one time in any of the EU member states or, in some circumstances, in the UK (see more on this by reading the HMRC article linked below).
Once signed up for OSS the business must account for VAT on all distance sales through the OSS. Businesses over the £8,818 threshold that use the UK OSS will need to register for VAT in the UK if they are not already. This will apply even if the overall turnover is less than the normal UK VAT registration threshold of £85,000.
Import One Stop Shop (IOSS)
The new package includes some changes to the way goods that do not exceed an intrinsic value of £135/€150 are imported into the EU and Northern Ireland. The Low Value Consignment Relief (LVCR) has been abolished.
So that the VAT can be accounted for on these sales to the EU, businesses who are not established in the EU or Northern Ireland and wishing to register for IOSS will be able to do this in any member state or the UK.
Businesses in Great Britain that also make sales of goods in consignments not exceeding £135.00 to customers in the EU will also have the option to register for VAT IOSS. These businesses will also be able to report their sales to Northern Ireland on the VAT IOSS return.
Online Marketplaces (OMPs) will be responsible for accounting for the supply VAT on goods located within the EU or NI when they sell these goods on behalf of overseas sellers located outside of the EU and NI. This will also apply to GB (England, Scotland, Wales) businesses that make sales of goods that are located in NI at the point of sale for delivery to EU customers.
The OMP will factor in the VAT as though they made the sale. Where it is a distance sale within the EU, the OSS return can be used to account for the VAT on these sales.
This information was taken from the following HMRC article.
It also includes some examples of how this will work in practice: https://www.gov.uk/government/publications/eu-e-commerce-package/eu-vat-e-commerce-package
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