If you export products from the UK, you’ll know that the way we sell goods to the European Union (EU) has changed and we understand all these new rules are a bit confusing. This blog contains a recent Q&A between HMRC and small UK based businesses answering questions about the Import One Stop Shop (IOSS), an e-commerce system recently introduced by the EU to simplify the payment of VAT.
Question: My business is based in Great Britain, and I regularly send low value goods to my customers in the EU. How will the new rules for trade that were introduced on 1 July 2021 affect me?
Answer: Low value consignment relief (LVCR), which relieves import VAT on goods below €22 (£15), has been removed across the EU, and goods sent to customers in the EU will be subject to import VAT.
The changes will affect businesses like yours if you send non-excise goods in consignments that do not exceed an intrinsic value of €150 (£135) to the EU including Northern Ireland. These goods will be subject to import VAT.
To simplify paying VAT the EU has introduced a new optional online monthly VAT reporting and payment system, the Import One Stop Shop (IOSS), which simplifies the collection of VAT on low value imports of goods into the EU.
If you are registered for the IOSS scheme you should charge VAT at the point of sale to your customers in the EU, and account for the VAT charged on your sales across the EU on a single monthly IOSS return and payment. Once registered for the scheme, VAT on IOSS scheme goods should be accounted for on your IOSS return.
If you have registered for IOSS in an EU member state and are importing goods to Northern Ireland, you should notify HMRC of your IOSS number.
If you register for IOSS in an EU member state further guidance on how to notify HMRC is available at GOV.UK.
The IOSS scheme does not cover goods imported into the EU and Northern Ireland in consignments that exceed £135 (€150) or goods subject to excise duty.
Question: Can I register for the Import One Stop Shop in the United Kingdom?
Answer: The United Kingdom (UK) is taking a phased approach to delivering the VAT IT systems linked to the EU’s e-commerce package, and the Import One Stop Shop registration in the UK is not currently available for businesses.
The UK is implementing these changes in Northern Ireland, in accordance with the UK obligations under the Northern Ireland Protocol, where EU VAT rules with respect to goods will continue to apply. However, Northern Ireland is, and will remain, part of the UK’s VAT system.
If your business is based in Great Britain (England, Wales or Scotland), EU rules allow you to register for IOSS in any EU member state, as long as you appoint an EU established intermediary to represent you.
Further guidance can be found on the HMRC website.
Question: When I register for the Import One Stop Shop in EU, why do I need to appoint an intermediary that is established in the EU?
Answer: The Import One Stop Shop (IOSS) is an EU system. If you decide to use IOSS you will need to appoint an EU-established intermediary.
The UK government is currently in discussions with the EU Commission about the issue of intermediaries, in relation to the EU IOSS scheme, to see whether we can agree that this condition should not apply to UK businesses.
You can find further guidance on the HMRC website.
Question: I am registered for VAT in the United Kingdom and registered for the Import One Stop Shop. Do I account for VAT on Import One Stop Shop supplies on my IOSS return, and what VAT amounts should I account for on my UK VAT return?
Answer: If you are UK VAT registered and registered for the Import One Stop Shop (IOSS) you should use the IOSS return to account for VAT on the sales of eligible low value goods in consignments not exceeding £135 (€150) into the EU and Northern Ireland.
Additionally, if you sell goods in consignments not exceeding £135 (€150) through an online marketplace that is registered for IOSS, the online marketplace, rather than you, will account for the VAT due on their IOSS return.
If you make supplies of goods that are not covered under the IOSS scheme, you must account for VAT under the normal rules. Goods sold to customers in NI in consignments exceeding £135 should be accounted for on the UK VAT return.
Question: I am not VAT registered in the United Kingdom, but I have registered for the Import One Stop Shop in an EU member state. I send goods from Great Britain to customers in Northern Ireland, will I need to charge VAT on the goods?
Answer: If you are a business in Great Britain (England, Scotland and Wales) that is registered for the Import One Stop Shop (IOSS) but not VAT registered in the United Kingdom (UK) because you are below the UK VAT registration threshold, you should notify HMRC of your IOSS registration number prior to your goods moving to Northern Ireland. However, you do not need to charge VAT on sales of low value goods into Northern Ireland.