There are growing concerns that the UK’s e-commerce sector may be disrupted if the country leaves the EU on 29 March without a deal in place.
The British International Freight Association (BIFA) is asking the government to change the rules, which will leave freight forwarders acting on behalf of overseas parcel senders, rather than established UK buyers.
The problem for freight forwarders is that they consolidate parcels into loads for air or ocean freight for delivery to the UK on behalf of parcel operators, but are made responsible for the senders’ Customs and VAT payments under the new rules that designate them as Indirect Representatives by UK Customs.
Parcel operators in the Business to Consumer space have direct business relationships with both the sender and the customer of the parcel.
This has led to BIFA demanding the UK Government reviews the new rules to take into account the difference between parcel operators and freight forwarders.
BIFA claimed on their website that, “The proposals overlook the fundamental difference between Business to Business and Business to Consumer transactions.”
The UK Customs has announced that new rules on parcels will be introduced after Brexit. Following this change in regulations, sellers outside of the UK will have to pay VAT (Value Added Tax) on goods with a value below £135 (US$180) sold to UK buyers.
When the value for all goods in the parcel exceeds £135, UK buyers will need to pay the import VAT, customs and/or excise duty on these goods. The parcel delivery company will apply any necessary charges to the parcel and seek the payment directly from the UK buyer.
Sellers outside the UK include those in the EU, outside the EU, and the Channel Islands. This will include individual items worth £15 or less as they will no longer be eligible for the existing tax relief.
For excise goods – import VAT, Customs and Excise duty is applicable regardless of value and will be collected directly from the UK buyer by the parcel operator.
There will be two ways for sellers outside the UK to pay the UK import VAT on parcels to the UK HM Revenue and Customs (HMRC). Sellers can register for the UK HMRC new online service and are encouraged to do so to be ready to use it if the changes are introduced on 29 March 2019. They can also authorise a parcel operator to pay the UK import VAT to HMRC on the sellers’ behalf.
If sellers do not follow the new UK import VAT rules, parcels may be delayed or stopped from entering the UK. In addition, the UK buyer may have to pay extra tax and fees, and the seller may have to pay a penalty of £1000. More information about these potential changes, and others in the event of a hard Brexit can be found on GOV.UK.
BIFA is lobbying the Government on behalf of their Members in an effort to obtain a policy change, which will create a more sensible and balanced approach.