Retailers that heavily rely on online sales to EU consumers need to comply with VAT reforms, which were introduced on 1 July 2021.
The new rules were originally designed to stop an estimated €7 billion in annual VAT fraud by non-EU ecommerce sellers, mainly those in China.
But after the UK left the EU at the start of the year, around 26,000 small and medium-sized ecommerce businesses in the UK also need to comply.
Those who export goods to EU customers face the biggest upheaval, with VAT exemptions for SMEs and shipments of €22 or less being removed.
James Sibley, head of international affairs at the Federation of Small Businesses, said:
“UK small firms will lose exemptions for small consignments, while those within the bloc making cross-border sales under €10,000 a year will continue to enjoy [tax] breaks.”
Exporters who use online platforms, such as Amazon or eBay, can now register for VAT in the country where they sell most of their goods, which the European Commission estimates will cost up to €8,000.
Alternatively, it’s possible to subcontract VAT to the online platforms they use to sell their goods, or ask the postal service to handle VAT.
Small businesses could claim up to £2,000 each through the Brexit Support Fund, which closed on 30 June 2021.
Contact us if this VAT reform affects your business.