From 1 July, British retailers selling to the EU face huge changes to VAT regulations. ParcelHero reveals five reasons the new IOSS scheme is great news for UK sellers and five reasons it’s also frustratingly flawed.
Beleaguered British retailers are braced for yet more changes to how they sell goods to the EU. From 1 July, a new EU Import One-Stop Shop (IOSS) scheme means British-based e-commerce companies only need to register and pay VAT in one EU country to sell goods not exceeding £135/€150 across the entire EU. The new IOSS regulations certainly make retailers’ lives easier, but they aren’t entirely good news, says the international delivery expert ParcelHero.
ParcelHero’s Head of Consumer Research, David Jinks M.I.L.T., says: ‘On the face of it, the new IOSS scheme helps return things to their pre-Brexit norm. However, in the case of the IOSS, the devil really is in the detail. We’re revealing five reasons GB traders should welcome the new scheme and five reasons the IOSS might make selling to EU customers even more complicated and expensive.’
Five reasons to welcome the new IOSS
1. IOSS greatly simplifies VAT procedures by allowing non-EU online sellers (remember that includes sellers based in Great Britain post-Brexit) to register for VAT in one EU member state, collect VAT from all their EU sales and report on a single monthly IOSS VAT return. No more multiple VAT filings in multiple countries.
2. Life is greatly simplified for sellers using online marketplaces. These become the ‘supplier’ when cross border B2C sales are made on them by third-party sellers. VAT liability (collecting and reporting) for sales in EU countries will fall on the marketplace rather than the merchant, providing the consignment is valued at less than £135 (€150). Our top tip is that businesses using only online marketplaces may now be able to end any existing EU VAT registrations, as they will no longer be responsible for collecting and reporting VAT.
3. Retailers’ EU-based customers won’t be facing any more unexpected VAT payments on purchases of goods sold in Britain, which will build back trust in buying from GB sellers.
4. Northern Ireland-based companies may enjoy an exemption threshold. NI firms can join the alternative intra-EU OSS scheme. Providing their sales to the EU don’t exceed £8,818/€10,000 per annum, NI-based organisations will be exempt from paying VAT.
5. The IOSS scheme is voluntary and will speed up sellers’ EU shipments by creating a fast-track Customs clearance ‘green channel’ for consignments not exceeding £135/€150.
Five flaws in the new IOSS
1. The changes remove the previous VAT exemptions for SMEs on EU shipments worth £19/€22 or under. That means about 26,000 UK e-commerce sellers will have to register for VAT for the first time or stop selling to the EU.
2. The EU estimates it will cost around £6,900 per company each year for British sellers (that excludes Northern Ireland companies) to register and comply with IOSS regulations as a ‘non-Union’ user.
3. Unlike EU-based OSS users, IOSS users based in Great Britain don’t qualify for the new £8,818/€10,000 threshold before they have to pay VAT. Only Northern Ireland sellers (under the terms of the Northern Ireland Protocol) have this option.
4. The new IOSS only applies to deliveries of items valued under the £135/€150 threshold. For all goods over that amount, GB businesses will have three choices: ensure their customer pays the import VAT at Customs; offer the option of delivering with all duties paid (DDP) or hold stock somewhere in the EU and register for VAT there.
5. Confusion still exists around registration. The gov.uk website states: ‘…it is not expected that the UK IOSS registration portal will be available for use for the 1 July 2021 launch’. There is also uncertainty about whether GB companies signing up for IOSS in an EU country must appoint an intermediary agent to register and file returns. Together with the French and German governments, ParcelHero believes this requirement does not apply to British sellers, as the UK-EU trade deal includes a tax and VAT mutual assistance agreement. The Republic of Ireland is a favourite option for GB companies because it uses English in business but, just to complicate matters, it recently stated it doesn’t yet recognise the agreement. Consequently, it will require the use of an intermediary agent.
