Oh boy, here we go. I'm not a lawyer btw.
So the UK Government (or rather the English Government with everyone else being dragged along with them) is changing the way VAT is collected on imported goods. The documentation on it is wordy and kinda a mess. So, I'm going to give you an overview from how I understand it.
Here are current and 2021 onwards versions of buying an item from a non-UK-based company to be delivered to the UK.
CURRENT PROCESS:
1) Customer (me and you) places an order on [website].
2) Company/website fills in a customs declaration form stating what the contents are and how much they're worth.
3) The parcel is sent to the UK
4) Upon arrival in the UK, Border Force review the declaration and calculate what VAT is due, if any.
5) If the value of the contents is under £15, no VAT is charged. If it's more than £15, VAT is charged and the courier (Royal Mail/Parcelforce, UPS, etc) pays that customs fee on your behalf.
6) The method varies by courier, but regardless that customs fee is passed on to the importer/customer along with a ransom handling fee for paying on your behalf (no fee if no customs).
PROCESS FROM 1ST JANUARY 2021:
The proposed changes are that packages where the value of the contents are less than £135 before VAT will have their VAT collected by the exporter as part of the sale. This requires businesses to be registered with the UK Government to report how much VAT has been collected, and then pay it to the UK Government that way. The cost of doing this (both in registration and in labour) has already resulted in some companies announcing the intent to end selling to UK customers from January 2021. So, assumiung you can still order from them, here's the new process:
1) Customer (me and you) places an order on [website] and the cost includes UK VAT.
2) Company/website fills in a customs declaration form stating what the contents are and how much they're worth. Presumably there will be a "VAT Paid" declaration or something to go along with it.
3) The parcel is sent to the UK.
4) Upon arrival in the UK, Border Force review the declaration and whatever the setup is to know if the sending company is VAT registered.
5) If the company isn't VAT registered, then presumably the parcel is rejected and sent back? Not sure. Otherwise, the parcel gets handed straight over to the courier I think. However, if the value of the parcel is more than £135 before VAT, I believe it goes through the current route of charging the courier who then pass on the VAT and the handling fee.
6) In theory, if the parcel is under £135 before VAT, the VAT will have already been paid which means the courier shouldn't charge a handling fee. However, they do still have to work with Border Force and I'm not sure how much work there is with that. They may still try to get a handling fee off people because they can (cough ransom fee cough). I've asked Parcelforce what their intent is.
Things I'm not sure about because the government website doesn't explain it very well:
- Do companies who only ship to the UK if the value of the contents is over £135 still have to be registered for VAT? This could be a workaround to remain selling to the UK, but have a minimum order value of £135 to not need to change anything else.
- Will couriers in foreign countries be expected to reject parcels from non-VAT registered companies if they attempt to send, or will handling that be on the UK Border Force.
- Speaking of which, what will Border Force do with parcels that arrive without the thing that identifies them as being VAT Registered (and generally what is that thing)?
I'm hoping to find these answers out and update this post as I do. I am very concerned as someone who imports a lot of stuff from Japan from places like AmiAmi and CDJapan. Will they pay to keep selling to the UK, or will they just stop selling to the UK? What about proxy services where I ship locally and get them to send the consolodated package, will those need to register for VAT and charge me for VAT for anything I've bought?
Scary times.
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