EU VAT changes and what they mean for UK Businesses.

UK businesses need to consider VAT rule changes when selling to EU consumers, as they will be taxed according to the local VAT rate applicable in each EU country.

From 1 July, all UK businesses that sell to EU consumers and are responsible for delivering the goods will need to ensure that the correct rate of VAT is declared on the sale of the goods. The VAT rate will be the rate of the consumer’s country and it is important to note each EU country will have different VAT rates.

The new e-commerce VAT rule changes require businesses must ensure their websites and pricing structures comply with the new tax regime and with each EU country having different VAT rates, this may require considerable changes to websites. Businesses will also need to ensure they are correctly registered within the EU.

For sales valued below €150 per transaction, businesses can choose to register for the EU’s Import One Stop Shop (IOSS) or register in each EU country in which they have a domestic customer. The IOSS facilitates the collection, declaration and payment of VAT on behalf of UK sellers through a prior-appointed EU representative if the seller has no current establishment in the EU itself. The IOSS system also ensures that the supplier accounts for the correct amount of VAT at the time of purchase from within the gross amount paid.

Businesses selling B2C goods and services valued above €150 per transaction will be required to register for VAT in every EU member state where they make such sales.

To avoid liability for local VAT on the sale, businesses must change their terms of sale so that their customer is responsible for importing the goods into their country. The customer will have to pay the import VAT and any customs duty, but businesses must make this clear to their customers at the point of sale.

Businesses could also opt to have their delivery provider pay the VAT and any duties at the point of import into the customer’s country and have the costs charged back to them. This might not be the most cost-effective way of dealing with the changes but might mean that businesses can at least carry on selling goods on 1 July.