UK sales to EU consumers – VAT changes from 1 July 2021

Following the UK leaving the EU, more changes to VAT are due to take place on 1stJuly 2021 in particular for online traders.   The changes are to simplify compliance and reduce VAT fraud.

Three schemes will be in place from 1st July to deal with B2C supplies of goods and services to EU customers. Two of the schemes are enlarged versions of existing schemes, for businesses within the EU, the one stop shop. The third scheme deals specifically with distance sales of goods (with a consignment value up to €150) from stock held outside the EU. In each case, the scheme is designed to facilitate the collection of VAT by one EU member state, which is then passed onto the member state in which the supply is deemed to take place.

The overarching principle for both goods and services is to collect VAT by reference:

  • to the place where the customer belongs; or
  • where the transport of goods ends.

If you register for VAT using one of these schemes, you will complete one return for all EU sales, rather than being required to register for VAT in all member states in which your customers are based.

If you are an E-commerce business you need to prepare for new EU rules that will remove the VAT exemptions for small and medium sized companies following changes to the treatment of sales taxes on products from outside the EU.  From the 1st July small and medium sized UK businesses lose VAT exemptions for sales worth €22 or less, as all imports into the EU will be subject to the local sales tax.  The UK has imposed similar rules for businesses importing into the UK.  Businesses will have to either register for VAT in the country they are trading with or sign up to the optional Import One Stop Shop Scheme (IOSS).

B2C services

Following the departure of the UK from the EU, from 1st January 2021, UK businesses that sell broadcasting, telecommunications or electronically supplied services to EU consumers have been able to register for the non-Union One Stop Shop (OSS) to account for EU VAT on their sales across the EU states instead of having potentially multiple EU VAT registrations to account for their EU sales.

From 1st July 2021 the option to use the non-Union OSS is being extended to cover other services to consumers where the place of supply for VAT of the services provided by the supplier is in the EU and which until 1st July would require an EU VAT registration. The OSS extension list includes, for example, supplies related to land that is located in the EU and admission charges to various EU-based events.

B2C goods

Many UK businesses that sell goods to EU consumers have been impacted by the EU/UK export and import changes from 1st January 2021.  From 1st July 2021 the EU has confirmed the introduction of the optional Import One Stop Shop Scheme (IOSS) which will help many UK businesses who sell low value consignments of goods (with consignment value up to €150) to EU consumers. Using a special monthly EU IOSS return, an IOSS registration will allow a qualifying UK business to charge, collect and report EU VAT on all their sales of EU imported goods rather than having to register for VAT wherever they make imports into the EU. The IOSS scheme will allow qualifying imports to be made to the EU without the payment of import VAT and should help to improve pricing clarity for customers and control over deliveries. IOSS cannot be used for consignment where the value is > €150, the current import VAT rules remain applicable on such sales.

Registration for IOSS can be made in any EU state of choice and pre-registration for the scheme is available now.

The OSS and IOSS schemes have very little flexibility to backdate the point at which you join and start paying VAT. If one of these schemes can make life simpler, it pays to plan ahead and avoid multiple VAT exposures in the EU.

Should you need assistance or support in respect of the changes, please do not hesitate to contact us.