The international parcel delivery expert ParcelHero says the Government’s £900M ‘Get Ready for Brexit’ site gives little new information to businesses; but reveals VAT will now be imposed on previously exempt packages below £15… If there’s a no-deal Brexit.
The international delivery expert ParcelHero says the Government’s new £900M ‘Get Ready for Brexit’ campaign’s website (launched before Wednesday’s bill blocking a no-deal Brexit) contains little fresh information for businesses; but does reveal that the £15 Value Added Tax (VAT) threshold on overseas parcels would be quietly scrapped should there still be a no-deal Brexit
Says ParcelHero’s Head of Consumer Research, David Jinks MILT:
‘ It’s anyone’s guess currently whether we will still face a no deal Brexit; but it’s wise we continue to prepare. The problem is businesses exporting or importing from the EU will be looking in vain for additional information on the new gov.uk/Brexit site; which largely repeats the well-rehearsed advice about obtaining EORI numbers, etc. There’s little information here worth spending £900M to publicise; yet, as our recent report shows, many businesses may never recover from failing to prepare for Brexit. However, there is confirmation by the Government, in its ‘VAT for businesses if there’s no Brexit deal’ pages, that shoppers will now be hit by new VAT on low-value goods entering the UK by parcel, following a no-deal Brexit.’
‘Previously parcels arriving in the UK worth £15 or less were VAT exempt. But following a no-deal Brexit all VAT-rated goods arriving by parcel will be liable, no matter what their value. That means British shoppers buying from the EU and further afield will be paying 20% VAT of up to £3 on an item costing £15 – something they have never had to do previously.’
‘Back in 2017 the Government announced that Low Value Consignment Relief (LVCR) would not be extended to goods entering the UK from the EU. The Government’s latest update reveals ‘This note confirms that if the UK leaves the EU without an agreement then LVCR will no longer apply to any parcels arriving in the UK…This means that all goods entering the UK as parcels sent by overseas businesses will be liable for VAT’ (unless they are zero VAT rated items such as children’s clothing).
And in a major change, it will be overseas sellers, from the EU and beyond, who are responsible for the collection of British VAT on all goods arriving here by parcel up to the value of £135. And they will also be responsible for accounting for the VAT with HMRC. ‘That new level of complex VAT procedure could put off international traders and make us a far less competitive market,’
‘Currently it is the receiver – that’s usually the buyer – who pays VAT on overseas parcels – which means the buyer is very aware they are having to stump up payment of VAT. But, in the reverse of normal practice, the Government now wants the overseas seller to pay VAT on items worth £135 or under (including the new VAT on goods below £15) by including the tax in the purchase price to the consumer and then passing it to the UK Government. The Government’s new web site reveals: ‘Overseas businesses will charge VAT at the point of purchase and will be expected to register with an HM Revenue & Customs (HMRC) digital service and account for VAT due.’
And ParcelHero argues the final insult for Brit shoppers is that VAT need not have been imposed at all. It claims the Government’s justification for the new VAT charges – ’This aligns the UK with the global direction of travel on LVCR’ – is not consistent with its previous Brexit claims. Says David: ‘Far from slapping taxes on previously exempt parcels, the then-contender for leader of the Conservative Party, Michael Gove, promised earlier this summer he would scrap VAT entirely if he became PM. And Nicky Morgan, then Chair of the Commons’ Treasury Committee, also confirmed in March 2018 there was the opportunity to “abolish it completely” in the event of a no-deal Brexit. Remember, the tax was only introduced in order for the UK to align with Europe when Britain joined the EEC in 1973.’
Concludes David: ‘UK buyers and international sellers will all find there’s a price to pay, should a no-deal Brexit be the final outcome of all the current parliamentary and election shenanigans.’
For more information on how unfolding Brexit plans are putting increasing pressure on UK businesses see: https://www.parcelhero.com/blog/expert-shipping-advice/study-will-brexit-resolution-whatever-its-shape-bring-dividends-or-disaster