Brexit - is this something we ALL need to worry about?

Shop Talk
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Hi all - as I don’t sell digital products this isn’t something that’s worried me or that I’ve paid any attention to, but I saw this on FB today saying that post-Brexit the paying of VAT for both digital AND physical goods will change and that the thresholds will be taken away. I don’t really understand what this is all about to be perfectly honest having ignored it all thinking it wasn’t relevant to me - but I’m not sure if it’s something we should all be worrying about if we sell physical or digital items to customers outside the UK?! Bit concerned as, although the UK market is about 80% of where I sell, I do sell to customers overseas and worrying that this could mean restricting sales to the UK only!!

Anyone got any ideas or thoughts? @Folksyadmin??

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As with GST in Australia and state sales tax in the US I suspect that any post brexit changes to VAT collection and remittance would need to be sorted out by the owner of the market place (eg folksy or etsy) rather than the individual seller.

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I wouldn’t worry about ANYTHING Brexit until the MP’s have finished squabbling about it!

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Yes, although I don’t just sell on market places: I have my own website too, probably like many other sellers - so it is something that could potentially affect me and others directly.

I must admit, like @rosesworkshop feels, I tend to push all Brexit related panic to one side as I figure that it’s pretty much out of my control anyway! The thing that hooked me with this today though is that there is still time to put pressure on our local MPs and that it’s something that hasn’t been discussed and could affect many micro businesses - I’m just not sure I know enough about it all to wonder whether that’s something I should/could do though!

I don’t know what @Folksyadmin @FolksyStaff feel - or know - about it?

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Absolutely! And if the customs border ends up being down the Irish Sea, we won’t even be able to sell to people in another part of the UK without adhereing to EU rules concerning export/import duties. I personally think that is completely outrageous, but then I didn’t vote for Brexit. So at least I can keep on telling people I told them so!!!

Sam x

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Oh the whole idea of us coming out of Europe still flabbergasts me - I voted to stay too :frowning:

So, basically, the way I (think!) I understand it is that at the moment if you sell digital goods to a customer overseas you have to pay VAT to the customer’s country (whether you’re a sole trader, or limited business, it doesn’t matter). And to make this easier for everyone the government set up VATMOSS so that you basically enter records (quarterly I think?) via HMRC stating what sales you’ve had and then pay the VAT owed. I’ve just had a quick look at the VAT rates charged around the world and most of them seem to charge around the same as the UK - about 20%. So if you digitally sell an item for £10 you have to pay £2 to HMRC. But VATMOSS only applied to the first £10k of overseas sales - so basically small businesses could use it, but the likes of Amazon couldn’t. And VATMOSS only applies for sellers in the EU - so when we leave next year it will be taken away from us.

Think I’ve got that right -correct me if not!

Now, it looks as though that £10k threshold is going to be removed in March next year when we leave the EU. So that means VATMOSS will also go as we will no longer be in the EU, and all sellers - large and tiny - will be expected to individually settle the VAT themselves country by country, rather than via HMRC. And that would be massively complicated meaning that most small businesses (and particularly those that do their own accounts I would imagine) will decide not to sell outside the UK. From watching that video, to calculate VAT owed you would need to track exchange rates over a month on a daily basis, work out the average, and then pay the VAT based on that average. And if you make a mistake that country can audit you and you have no protection or help from HMRC.

And the most concerning thing is, they are also suggesting that this will apply to physical goods too - so everyone will be liable for paying VAT on every sale outside the UK to the customer’s country.

I’ve had a quick read of Folksy’s blog back in 2014/15 when VATMOSS first started, and it looks as though the VAT payments for digital sales aren’t something that Folksy are responsible for, it’s the individual sellers who are responsible as the contract of sale is between the seller and the customer. (Again, I think that’s right, I may be wrong!). And I’m assuming that the same will apply for physical sales - the responsibility will be for all of us individually to pay the VAT owed. Now, looking at the forums here, when this was first introduced many sellers (eg those selling patterns etc) got around it by printing and mailing actual patterns rather than emailing. But obviously that’s not possible to do with a physical item!

So, if physical goods ARE going to be included as well as digital (probably in 2020), and assuming that VATMOSS will be taken away in March (which seems to be the only workable practical way of paying VAT for us small businesses), then isn’t this something we should be kicking up about? Especially given that the government isn’t negotiating this at all for us - they’re just letting it go on!

But also, if this means that for every physical sale we make outside of the UK we are going to have to pay (very roughly) 20% VAT is it not just going to be the case that many of us will simply stop selling overseas - because we can’t afford to pay that on already small margins? Or will people just have an ‘outside UK’ price that’s about 20% higher for overseas customers? (Assuming we’re happy to tackle filing the VAT bill individually for that sale which makes my hair stand on end just thinking about!). So, a knitted hat, for example, you can buy for £10 if you’re in the UK, but £12 if you’re overseas, that sort of thing (or a £10 knitted hat outside the UK, but an extra couple of quid on the delivery cost to cover it?!)?

Sorry for the essay - I’m just trying to get my head around this and working out how it could impact on me and all of us! x

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I agree with everything you say, and if harmonization means that we will all have to apply those rules if sending to NI (which I have done quite frequently) then, as I said, that’s outrageous, both for me and for anybody in NI who likes things that are made by independent craftspeople based on the mainland. The only thing I’m not sure about is that currently I am not registered for VAT, and therefore I don’t charge it, as it would be illegal for me to do so within the UK. Will this change after Brexit? Who knows?

Sam x

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I’m not entirely sure, but I don’t think it matters if you’re VAT registered or not - it would apply to everyone! And as you say, the whole NI question could be utter madness - with customers losing out, but more importantly with us sellers losing out. Like you, I sell quite a bit to NI and not being able to (or at least, not without jumping through hoops and taking a big hit on profit margin) would be a real loss and impact. :frowning:

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Sorry @FolksyStaff @Folksyadmin, I know I keep tagging you but is this something that you have any opinion or thoughts about? If there were to be a campaign on this an organisation of your size would have more chance of being noticed than us little folk!

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I have done some research on the HMRC web% site. It seems that to be registered for the VAT MOSS scheme (and you have to register for it before you start using it) you first have to be VAT registered. The website suggests that if you only make “occasional” sales then they would consider that you were not a business and merely a “hobbyist” and therefore they would not expect you to register for either scheme. If you were making many sales a year, but not reaching the VAT threshold, then you can still apply for VAT registration, but submit a 0% VAT return to reflect your status. The VAT MOSS rules only apply to digital products and not to physical products.

This answers some questions, but raises more. What if you sent something (physical) to another member state at the moment and the VAT threshold was £5 (I believe this is unlikely)? You would be responsible for collecting the VAT and registering for VAT in that member state and submitting a yearly VAT return. But what about the “hobbyist” exception. Does every member state use the same exception, or is this just the UK?

What happens after Brexit? Who knows, as there are no comments regarding VAT status following Brexit at all on HMRC. You just have to pick a journalist and decide whether or not you believe them if you want an opinion.

Sam x

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Ooh well done on the investigating Sam! It’s so confusing isn’t it - and what constitutes ‘occasional’ I wonder?!

They’re saying that at the moment this only affect digital sales, but physical sales are going to be included by 2020 (so in about 18 months). But what is going to happen to the whole system after March next year I don’t know - and it seems nobody does, because the government haven’t even asked by all accounts. It seems they’re concentrating on big businesses, but not even considering micro businesses and how to address what will happen to those of us who send overseas ‘occasionally’ (I’m trying not to take offence at their ‘hobbyist’ term lol!!).

I’ve put together a letter to my local MP asking him to ensure that they discuss this during Brexit negotiations, and to stop ignoring it. I’m asking for there to basically be an extension to the thresholds and to VATMOSS until a workable solution can be found for tiny businesses - in the hope that an extension will mean that they come up with a workable solution by 2020 when physical goods join the fray.

But at the end of the day, I do feel as if Brexit is just a massive juggernaut that big business and high finance, and political gaming, play a part in - and our concerns are just tiny little squeaks in this huge noisy room: they won’t hear or pay any attention. So I guess ultimately it’s just going to be a waiting game to see what happens. And if the worst comes to the worst, we (hopefully) get through the loophole by being ‘hobbyists’ or if not we sell to UK only, or only sell to overseas customers via a big 3rd party that will handle it all on the sellers behalf by acting as the agent. (Which, if that did happen, could mean an interesting change in the online marketplace arena.)

Squeak! x

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Totally! What a mess we are all in :grimacing:

(And why are there no cleaning/mop and bucket emojis? Damn the patriarchy!)

Sam x

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:rofl::crazy_face::poop::hole::eu:

x

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Wow , thank you for explaining that scary senario. Goodness me :frowning:

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I’ve had notification from another selling site about vat rules for the EU and it looks complicated and could be expensive so suspending any shipping to EU and Europe for now.

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Oh blimey… I think it would be really helpful if @folksycontent could maybe give us some guidance on this… I appreciate they’re not able to give legal advice but some guidance (in simple terms because I get so bamboozled by all this!) would be really helpful. Reading back to what I was saying back in 2018, if the only safe/uncomplicated way to selling overseas is to sell via a 3rd party marketplace-type site (ie, one that’s big enough and has the capability to work out VAT etc at the point of purchase), then I think that’s something Folksy needs to be in on. Because if that’s going to be the only reasonable way of selling to overseas customers, it could mean that Folksy becomes a UK only site for customers as well as sellers - and that’s very limiting.

Can you give a clue which other selling site sent you the notification Maggie?

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It was a online yarn shop that I subscribe to their newsletter. But I’m at Hatfield House this weekend and talking to one of the other exhibitors who said keep an eye on the royal mail website as they will have some guidance on there. Fingers crossed.

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There is some guidance on selling overseas in this Folksy blog post, although it doesn’t cover digital goods.

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I have stopped selling to EU at the moment because of info from the other site - that dark side one!! Deciding which tariff codes are required looks very complicated especially for those who sell different types of crafts - so I have decided to leave it a bit until more info comes out. I think the new tariff numbers are coming into use on 1st July 21.

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I think I’ve got my head around the tariff codes, and filling out the form when posting seems quite painless as I just do it through the RM site and then write in the code details, etc once I’ve printed it off. I’ve got my EORI numbers (one for EU and one for sending to Eire). I’ve got my sticky clear envelope thingies to stick my 3 copies of the invoice inside. I’ve got a notice on my shop (and also on my own website) saying that the buyer is responsible for import duties and costs.

BUT… it’s this VAT duty thing that’s worrying me. I think, from July 1st customers are going to be paying these duties and those costs anecdotally seem to be high (from what I’ve seen other businesses saying), and it’s also causing delays for the customer receiving their item. I think they’ll be paying VAT on the item cost (plus the postage), plus an admin fee (and I think those charges vary from country to country).

I’m not a seller on E, but I’ve seen some sellers saying that E are going to be collecting these VAT etc payments when the customer pays and taking responsibility for paying it to the authorities. That means the customer can see what the full cost including duties is going to be, so won’t get a nasty surprise. I think (I need to start every sentence with those 2 words!) that there is a service that sellers can pay for themselves that will also do all this for them, but it costs something like £2k a year.

I think (!) that from a buyer’s point of view, whilst I might have a declaration that they’re liable for any import duties themselves, it’s not a great arrangement - they won’t know what those duties are going to be. So I can see the appeal of E, basically taking that stress away from the seller and also letting the buyer pay for the ‘all in’ price that included duty.

It’s interesting that you’ve decided to stop selling to the EU Jo @GINGERPINEAPPLECRAFTS - I keep getting the impression that E is going to be handling the duties side of things, although you’d still need to complete the CN22 form with the tariff codes, etc. Is that the main reason you’ve turned off EU orders?