Distance Selling and VAT post 31/12/20

Can someone just confirm I am on the right track please?

Didn't find your answer?

So as I understand things at the moment, if a client sells widgets to Joe Bloggs (Jean Dupont) in France they can sell him €34,999 of value and keep charging him UK VAT, but the second their total sales in France pass €35,000 in a calendar year they have to register in France and charge French VAT.

From January the €35,000 is gone and so they need to register in France (and Germany, Poland, Spain) from the first Euro.  OR they can just treat the goods as a UK export and charge no VAT, but Jean then needs to pay the French VAT to get his widgets.  I can see why Jean would be upset by this (I once accidentally ordered some computer RAM from the US and was very upset when I got a bill from Her Majesty for the 17.5%).

So online guides suggest rather than foisting the bill to Jean you can instead register in France, pay the import VAT Jean would normally pay and recover it from France.  Ok, makes sense, I see how that would be better.  Except I think you then need to treat the sale as taking place in France, and so charge French VAT.

This is touted on websites as being the better way, but surely everyone ends up in the exact same place (Jean pays no import VAT, but he gets charged the same amount of French VAT nontheless; the seller ends up VAT neutral).

Am I missing something?  Jean used to buy the widgets for £100 + VAT, so he paid £120.  The options from next month are he pays £100 to the client and (the equivalent of) £20 to the French VAT authorities to release his goods, so £120.  Or my client says 'Worry not mon ami, mon brave!  I will register in France and pay the £20 import VAT!  Forget that £100 fee I sent you, here is the new version!  You must now pay me (the equivalent of) £100 plus the French VAT of..... £20'.

I assume I'm not seeing something, doesn't Jean always pay the exact same amount and the client always ends up with the exact same amount (ignoring fees for registering abroad etc...)?

Replies (4)

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Replying to leshoward:
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By ImNotSureBut
15th Dec 2020 10:21

leshoward wrote:

This is your best answer: https://www.accountingweb.co.uk/tax/business-tax/brace-for-brexit-13-sel...

Thanks Les. That article slipped me by completely when it was first published!

That reassures me, I seem to have got the mechanics right, though there are factors I perhaps hadn't put enough weight to (such as the relative faff the customer will have to go though to get their goods).

I'll have a muse and speak to my affected clients so they can decide what they want to do; I'm not seeing a clear winner in terms of options, they all seem to involve extra costs to the seller or extra faff to the buyer.

Thanks again.

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By Another One
15th Dec 2020 10:31

It always depends...

By and large it is right, but what if UK VAT and target country VAT rates are not the same? That would not matter if the seller registered, but if the buyer pays it it will make a difference. You can say this is negligible, like you suggested with the admin cost of registering for VAT in another country. This admin cost for many small traders can be a big burden, especially if they are selling to many different EU countries.

Then there is the tariff question too, unless you are optimistic about the later than last minute trade talks.

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Replying to Another One:
VAT
By Jason Croke
16th Dec 2020 08:31

If the value of goods is less than £135/€150 then there is no duty payable, so deal or no deal doesn't really matter for those SME's selling low value goods into EU.

Between January-July, UK sellers selling to EU consumers can either ship DAP (Delivered at Place), meaning EU customer picks up the VAT bill or UK seller can register for VAT in EU destination but if selling to every EU member state that is impractical to have multiple registrations, so consider a warehouse in EU or being importer of record in say Netherlands, register for VAT there, reclaim import VAT, onward sale to EU customers follow normal EU rules (distance selling, etc).

Then from July, get an OSS (One Stop Shop) registration, VAT is paid by customer to you, you pay that over on the OSS return. So it'll be much easier come July.

There are potential solutions, but no one size fits all, all comes down to cost, effort, customer experience, etc.

This OSS was coming in regardless of Brexit, if UK was not leaving the EU, then we'd be applying the rules from July. As we've left the EU, then we are applying our own rule from January 2021, so non-UK sellers (that includes EU sellers) selling to UK consumers will need a UK VAT number, which is why there are some news reports about how some overseas sellers are not going to sell to UK from next year - and touted as a negative about Brexit - but the implementation is not about Brexit, it is about Chinese (mainly) and other overseas sellers selling to UK/EU consumers and undercutting domestic retailers by avoiding VAT (marking their parcels as $12 when it contains $100 of goods, etc.)

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