VAT changes post Brexit

[VicParticipant @vic]

Posted by Steviegtr on 03/01/2021 23:49:55:

The way i read it the international seller has to charge you the VAT & then send it to the HMRC. How that will work out will be interesting.

Or i have got it wrong, which is ever possible.

Steve.

I think only those sellers that have registered with HMRC will collect VAT at source. If you buy from an unregistered seller then you will have to pay the VAT and a collection fee (as before) on collection/delivery.

[SillyOldDufferModerator @sillyoldduffer]

Posted by Vic on 04/01/2021 13:55:17:

Posted by Steviegtr on 03/01/2021 23:49:55:

The way i read it the international seller has to charge you the VAT & then send it to the HMRC. How that will work out will be interesting.

Or i have got it wrong, which is ever possible.

Steve.

I think only those sellers that have registered with HMRC will collect VAT at source. If you buy from an unregistered seller then you will have to pay the VAT and a collection fee (as before) on collection/delivery.

That's right.

One thing the rules are very clear about is that unless the buyer can show HMRC got it wrong the customer is always responsible for paying the tax and charges. It doesn't matter where the money is collected from or what goes wrong.

If a buyer chooses not to pay VAT locally, it's his job to ensure the foreign seller really is VAT registered. The customer pays if the seller makes off with the money – or more likely – cocks up the paperwork. Basically we now trust foreign sellers to deliver goods and pay the tax rather than simply put stuff in the post.

As most goods do get supplied, there's no reason to suppose foreign vendors won't sort out the tax too. Foreign vendors already have to pay whatever local taxes apply, so a bit of extra UK processing may not be a major issue. Certainly not a major overhead for a big organisation, though I expect the little guys will hate it.

And foreign businesses have always completed Customs Declarations on our behalf. Customer pays if those are wrong too.

Dave

[Michael GilliganParticipant @michaelgilligan61133]

O.K. …. here’s a demonstration of the ebay process in operation

[ note my previous post ]

I offered £3.50 each, for two, and the Seller accepted

… Here, as anticipated is ebay’s ‘Invoice’ including VAT

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Now … If you have the stamina; look at the documents I linked in this other thread: **LINK**

https://www.model-engineer.co.uk/forums/postings.asp?th=170119&p=1

MichaelG.

[Michael GilliganParticipant @michaelgilligan61133]

Here is a brief extract from ebay’s explanatory text:

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MichaelG.

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Ref. **LINK**

https://www.ebay.com/help/buying/paying-items/paying-tax-ebay-purchases?id=4771&st=2&pos=2&query=Paying%20tax%20on%20eBay%20purchases&intent=tax

[John RutzenParticipant @johnrutzen76569]

I bought a cheap item from China today, it said 'VAT collected' on the checkout. Wondered what it meant, now I know. There was no increase in the price, it seemed to be part of it.

[Robert Atkinson 2Participant @robertatkinson2]

Here is an interesting twist, If Ebay are the "seller" in the UK then as a retail outlet the advertised price should include VAT. Ebay don't let VAT registered sellers advertised ex-VAT (ebay maks fees on the VAT) So why should they. Even worse if they are collecting VAT "on behalf" of a UK non VAT registered seller.
I don't think that this has been properly though out and may not be correct. Watch this space.

Robert G8RPI.

[Martin 100Participant @martin100]

I’ve heard mention elsewhere that this ‘collect VAT at source across the world thing’ is to be adopted by the rest of the EU later in 2021, the UK is, by virtue of the exit, just ahead of the curve.

Some suppliers of services like web hosting, even where they have no UK/EU presence and where the hosting equipment and the domain name are essentially nothing to do with the EU/UK, have charged VAT at a rate depending on the location of the purchaser for several years. They do supply a legitimate VAT invoice.

But there are suppliers of the same services that simply stuck two fingers up at whoever and charge EU/UK customers the same as everyone else.

[Michael GilliganParticipant @michaelgilligan61133]

Posted by Robert Atkinson 2 on 04/01/2021 22:08:44:

[…]

Even worse if they are collecting VAT "on behalf" of a UK non VAT registered seller.
I don't think that this has been properly though out and may not be correct. Watch this space.

Robert G8RPI.

Robert,

Have a look at the small print below £8.40 in my recent post

… The words “where eBay is deemed supplier” are significant.

MichaelG.

[Robert Atkinson 2Participant @robertatkinson2]

MichaelG,

That s my point, If a small trader is below the VAT threshold (£85,000) they may now be at a 20% (plus fees) disadvantage when using ebay or other OMP.

Robert G8RPI.

[JasonBModerator @jasonb]

Or you could say they have lost the advantage they previously had over a small but VAT registered company, you can still register for VAT if below the threshold.

If they do find they are loosing out then it's easy enough to register and with modern accounts software just a few clicks to do the quaterly return. They may even be better off once they can claim back VAT on their material and overhead purchases, really depends on the labour content of their selling price.

Edited By JasonB on 05/01/2021 08:08:23

[Michael GilliganParticipant @michaelgilligan61133]

Posted by Robert Atkinson 2 on 05/01/2021 08:01:14:

MichaelG,

That s my point, If a small trader is below the VAT threshold (£85,000) they may now be at a 20% (plus fees) disadvantage when using ebay or other OMP.

Robert G8RPI.

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The small trader in question gained or lost nothing … it’s simply that ebay collected £1.40 on behalf of HMRC

MichaelG.

[JasonBModerator @jasonb]

They may have lost a sale someone offering the item at the non VAT price elsewhere.

[Michael GilliganParticipant @michaelgilligan61133]

Posted by JasonB on 05/01/2021 08:30:21:

They may have lost a sale someone offering the item at the non VAT price elsewhere.

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But in this case they didn’t … because I opted for the convenience of using ebay

MichaelG.

[IanTParticipant @iant]

VAT is an interesting tax – as (in theory) it passes though any intermediaries (is transparent) and is only charged to the end-user.

My company was VAT registered, which with a modern (e.g. Sage) accounting systems was not generally a problem but some care was needed when coding items we didn't often invoice. Then trying to figure out what (or if) VAT should be charged on became much more time consuming.

A small UK trader (<£85k) dealing directly with his customers has an advantage over larger suppliers in this respect but at one time often lacked the market access that companies like eBay and Amazon now provide. However, it seems eBay etc will now charge VAT on (all) their sales – really just closing a loophole in the VAT system – but causing all sorts of side issues for sellers.

The solution for small traders is to step up direct marketing (operate their own website) or work through other (social?) media where the actual transaction (e.g. payment) is direct – one to one. The 'media' supplier could still charge a fee for services rendered – but the buyer would then only pay VAT on any referral fee (and not the actual product).

With regards Chinese imports, this just levels the playing field for VAT registered UK distributors who have always had to compete with overseas suppliers shipping in goods with invalid (e.g. fraudulent) valuations – or leaving the customer to sort out the VAT/Duty mess after receipt.

I expect things will settle given time – it's all very new at the moment.

Regards,

IanT

[Michael GilliganParticipant @michaelgilligan61133]

Posted by IanT on 05/01/2021 10:19:23:

[…]

However, it seems eBay etc will now charge VAT on (all) their sales – really just closing a loophole in the VAT system – but causing all sorts of side issues for sellers.

[…]

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May I ask … Why do you see it as “causing all sorts of side issues for sellers” Ian?

The VAT invoice clearly shows ‘my’ VAT charge being collected by ebay [although the PayPal transaction shows the gross amount being sent to the Seller] … so presumably ebay manages the operation and the Seller doesn’t feel a thing.

MichaelG.

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[IanTParticipant @iant]

Posted by Michael Gilligan on 05/01/2021 14:12:50:

Posted by IanT on 05/01/2021 10:19:23:

[…]

However, it seems eBay etc will now charge VAT on (all) their sales – really just closing a loophole in the VAT system – but causing all sorts of side issues for sellers.

[…]

.

May I ask … Why do you see it as “causing all sorts of side issues for sellers” Ian?

The VAT invoice clearly shows ‘my’ VAT charge being collected by ebay [although the PayPal transaction shows the gross amount being sent to the Seller] … so presumably ebay manages the operation and the Seller doesn’t feel a thing.

MichaelG.

Well "Sellers" come in various shapes and sizes Michael.

As a 'private' seller (e.g. non-business) it would seem that anything I sell via eBay may be 20% more expensive than before – and although I will still get the VAT exc. price – my Buyer will be paying an extra 20% and will therefore probably take into consideration this new (VAT inc.) cost when bidding – so my prices may be depressed. Second-hand goods are not subject to VAT for non-VAT registered sellers – but will be now if purchased via eBay. (Of course, I often buy things on eBay too – and this will clearly inflate costs if the VAT rules are applied as is being suggested.)

But I also believe that many small (genuine non-VAT registered businesses / small traders) also currently use eBay (& Amazon) to promote & sell their products – and they had a 20% price advantage against larger (VAT registered) suppliers that will no longer exist.

Of course, we also have had over-seas suppliers (who would need to register for VAT if based here) essentially by-passing the VAT system – to the disadvantage of UK importers. I think this may become more difficult to abuse in the future.

Of course, this all assumes that the VAT rules are implemented/interpreted as has been suggested.

Regards,

IanT

[Michael GilliganParticipant @michaelgilligan61133]

Posted by IanT on 05/01/2021 14:39:21:

Well "Sellers" come in various shapes and sizes Michael.

As a 'private' seller (e.g. non-business) it would seem that anything I sell via eBay may be 20% more expensive than before – and although I will still get the VAT exc. price – my Buyer will be paying an extra 20% […]

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Here’s some more information ‘from the Horse’s mouth’ which might set your mind at rest, Ian

**LINK**

https://www.gov.uk/hmrc-internal-manuals/vat-business-non-business/vbnb20500

[ several pages ]

MichaelG.

[IanTParticipant @iant]

No, that's not really helped Michael – I already knew that I'm not a sole trader – just someone selling off the odd bit of personal junk (oops sorry – cross that out) I meant to say – my family heirlooms

But the statement posted from eBay seems to suggest that VAT will be added to any sale from "within the UK where the seller is not VAT-registered" (which I am obviously not). I'm probably being a bit dense – but that would seem to add 20% to anything I might want to sell?

Regards,

IanT

 

Edited By IanT on 05/01/2021 17:17:07

[Michael GilliganParticipant @michaelgilligan61133]

It’s very simple to do your own ‘dip check’ Ian … Just look at a few listed items

If ebay is intending to add VAT then that fact will be declared

MichaelG.

 

Edited By Michael Gilligan on 05/01/2021 17:27:52

[IanTParticipant @iant]

OK – good idea!

IanT

[John HinkleyParticipant @johnhinkley26699]

I'm not sure whether this will add anything to the discussion or muddy the waters further, but here goes……

Yesterday morning, I ordered a 500W spindle motor with ER11 chuck, mounting and pot-controlled power unit from a seller in China via ebay. It cost £59.84, after the application of a "special" discount offer. The message from ebay, confirming my order,received just after I placed the order, stated that… "20% VAT will apply". Checked my PayPal account and £59.84 had duly been paid to the seller. The item has been dispatched today and it remains to be seen when or if the VAT will be collected and by whom. Delivery is expected in about a week to 10 days, so I'll update this posting when it arrives.

I don't know what I'm going to do with it when it does get here, just thought it might make a tool post mounted spindle to replace my home-brewed one, which is less than satisfactory.

John

 

Edited By John Hinkley on 08/01/2021 09:29:45

Edited By John Hinkley on 08/01/2021 09:30:40

[WearyParticipant @weary]

I contacted my MP, Greg Hands (Con. Hammersmith & Fulham) pointing out that some European companies were refusing to sell to the UK as they regarded the new HMRC VAT requirements too onerous for the revenue involved. I further pointed-out that there was no apparent way for small and artisanal producers to undertake a simplified procedure.

Mr Hand's admin' support appear to be unaware of this 'hitch' and my observations have been forwarded to Jesse Norman (MP, Hereford & South Herefordshire), Financial Secretary to the Treasury for his consideration.

Regards,

Phil

[Michael GilliganParticipant @michaelgilligan61133]

Posted by John Hinkley on 08/01/2021 09:28:43:

I'm not sure whether this will add anything to the discussion or muddy the waters further, but here goes……

[…]

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Have a look at the ebay receipt, John

… Mine clearly showed VAT

MichaelG.

[photo to follow, when I have redacted personal details]

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Edited By Michael Gilligan on 08/01/2021 10:47:34

[SillyOldDufferModerator @sillyoldduffer]

Posted by John Hinkley on 08/01/2021 09:28:43:

I'm not sure whether this will add anything to the discussion or muddy the waters further, but …

…The message from ebay, confirming my order,received just after I placed the order, stated that… "20% VAT will apply". Checked my PayPal account and £59.84 had duly been paid to the seller. The item has been dispatched today and it remains to be seen when or if the VAT will be collected and by whom.

…

Good experiment, but I think it will have to be repeated later in the year.

At the moment the tax changes are in transition. No-one – whether customer, supplier or HRMC – has had time to understand and make all the necessary changes. Ebay need to change their computer system and/or foreign suppliers have to register for VAT, find out how to pay UK tax and HRMC have to organise to receive the money and check payments against goods received.

As sorting out the details will take time and early transactions are likely to be riddled with errors, the government has decided to relax checking at this stage. The new rules don't apply in full yet.

I think John's purchase shows the new system starting up, but not operating as intended yet:

• ebay have told the customer VAT applies, but haven't collected it (as far as I can see). This warns the customer that tax is due and collection might be enforced.
• It's possible that the Chinese supplier is up and running VAT-wise, and the tax will be paid by them. Unlikely!
• The UK system for collecting unpaid VAT on postal imports is operational, so John might be asked to pay VAT plus handling charges on delivery. I say might because this system has always been applied haphazardly in the past, and it may have been temporarily relaxed.

As the world gradually adapts to the new system we can expect the rules to be enforced step by step. I predict John won't be charged VAT on delivery this time, but buying the same in June, or next year will be expensive because the purpose of the new system is to discourage tax dodging.

Since VAT is a tax on the customer, we can expect many items to cost more in future, whoever collects it. But it's only what we should have been paying in the past. Same tax obligation, it's just that the system has been changed to tighten the net. (In theory grey imports are discouraged and more tax raised. How well it works in practice remains to be seen! I think it's quite clever. )

I've no idea how long a major change like this will take to settle – could be years. In the meantime expect to see posts from people reporting 'no-problem' whilst others have to pay extra. Don't be baffled – there's an element of risk. A package might fly through the system without being checked as most do, or it could be one of those randomly inspected.

Although it's not been mentioned, a fairly obvious improvement once tax collection has been moved abroad is for senders to add a unique HMRC tax-paid code to the label, for scanning by postie in the UK. Then VAT collection in the UK becomes simple – no tax-paid code on a foreign package means it should be inspected.

Dave

[Michael GilliganParticipant @michaelgilligan61133]

Dave,

Please see my post, immediately above yours

MichaelG.

[Author]

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