From 1st July 2021, any business selling goods to consumers in the European Union (EU) now have to follow new rules as part of The EU’s new VAT e-commerce package. The intention is that businesses which make B2C supplies will be able to account for VAT through a single One Stop Shop (OSS). Here we detail the government’s guidance for businesses affected by these changes.
Q1. Who is affected by the EU’s VAT e-commerce package that were introduced from 1 July 2021?
The e-commerce changes affect you if you are:
- supplying goods from Northern Ireland to non-VAT registered consumers in the EU
- supplying goods from the EU to non-VAT registered consumers in Northern Ireland
- sending ‘low value’ goods to Northern Ireland (or the EU) from outside the EU and Northern Ireland (including from Great Britain, England, Scotland and Wales).
Under certain circumstances, online marketplaces that are facilitating transactions, will also be affected.
Q2. What are the changes that have been introduced in the EU’s e-commerce package?
The EU’s e-commerce package, which started on 1st July 2021, means changes to the Business to Consumer (B2C) sale of goods between Northern Ireland and the EU, and the import of ‘low value’ B2C goods into the EU or Northern Ireland from outside the EU.
Overview of changes:
- a new single EU-wide threshold of £8,818 (€10,000) has been introduced for the B2C sale of goods in the EU. The threshold only applies to sales of B2C goods to and from Northern Ireland, which means that suppliers sending goods from the EU to consumers in Northern Ireland who exceed the threshold have to account for UK VAT in the United Kingdom
- online marketplaces are now liable for collecting and accounting for VAT on goods supplied to consumers in Northern Ireland, under certain circumstances
- the EU have removed low value consignment relief (LVCR) on imported goods, which relieves import VAT on consignments of goods of up to €22. LVCR was removed in Northern Ireland on 1 January 2021 in line with wider UK reforms
- two new EU-wide IT systems have been introduced: one for the declaration and payment of VAT on imports of low value consignments (IOSS); and the other for the declaration and payment of VAT on B2C sales of goods within the EU (OSS). Both systems are designed to reduce administrative burdens on business and to facilitate the collection of VAT across the EU
- for goods sent from Great Britain to Northern Ireland via an online marketplace that is registered for IOSS, the online marketplace will be liable for payment of VAT on non-excise goods in consignments not exceeding an intrinsic value of €150, rather than the seller.
Q3. What are the One Stop Shop and Import One Stop Shop, and why have they been introduced?
To support UK traders, HMRC have introduced two new VAT e-commerce IT systems to link with the new EU-wide IT systems.
The One Stop Shop (OSS) has been introduced to reduce the administrative burden on businesses.
The new opt-in online One Stop Shop provides traders with a quarterly VAT reporting and payment system and allows you to register for VAT electronically in a single member state for all the eligible sales of goods across any of the EU Member States. This will reduce the administrative burden on your business, as you will only have to deal with one administration, in one language, even if your sales are EU-wide.
For traders in the UK, only those who operate under the terms of the Northern Ireland Protocol, are VAT-registered and sell goods that total more than £8,818 (€10,000) per year to consumers in EU Countries from Northern Ireland, are eligible to register for the One Stop Shop Union Scheme.
The One Stop Shop is available on GOV.UK for businesses to register from 1 July 2021, additional guidance about this will follow.
The Import One Stop Shop (IOSS) is an optional VAT collection mechanism for imports of low value consignments.
The IOSS scheme is an optional accounting scheme that is available to businesses anywhere in the world importing low value non-excise goods, in consignments not exceeding £135 (€150), into the EU.
If you register for IOSS, you will need to charge and account for VAT on these supplies.
If your consignment is valued at £135 or more, then current rules continue to apply (i.e. Import VAT is due).
The IOSS system is not available in the UK yet, and until the system is fully implemented businesses can register in any EU Member State.
If you’re registered for IOSS and importing goods to Northern Ireland, you should notify HMRC of your IOSS number.
Here to help your business
TBL Accountants are available to support with all of your business’s financial responsibilities, including guidance on VAT and tax measures for businesses exporting to the EU. We’re specialists in personal, business, and charity accounting. To find out more, please contact our knowledgeable team today on 01702 466 886 or fill out a contact form here.