Shoppers Will Pay 20% VAT on All International Online Purchases from Jan 2021
In the News
Shoppers will pay 20% VAT on all international online purchases from January 2021.
An HM Revenue and Customs (HMRC) policy paper, released earlier this week, confirmed that Low Value Consignment Relief will end on all imports into the UK once Britain leaves the European Union (EU) on January 1, 2021.
ParcelHero’s Head of Consumer Research, David Jinks MILT, says the paper confirms VAT exemption ends on all VAT eligible imported goods valued at £15 or less next year. Previously, such items had escaped the tax.
The change is happening at the exact time many overseas sellers are being forced to register for VAT in the UK, which he says will drastically reduce the number of online retailers wanting to sell to Brits.
David said: “VAT is currently waived on any item under £15 (or 22 Euro) entering the UK from outside the EU. This saves red tape and annoying extra charges on low-value items.
“After Brexit, the changes mean that there will be VAT to pay on all applicable EU and overseas sales to the UK, charged at the UK VAT rate (currently 20%)."
But, what does that mean for UK online shoppers?
“Put bluntly, it means that an item that now costs £14.99 will cost £17.98 from 1 January because of the extra 20% VAT. We’ll all be paying up to around £3 more on every international purchase,” David warned.
The HMRC paper, “Changes to VAT treatment of overseas goods sold to customers from 1 January 2021,” also states that all international sellers will be responsible for charging and collecting the UK VAT on all items under £135.
That means overseas sellers will be required to register and account for the VAT to HMRC unless they use an online marketplace.
If they do sell through a marketplace, for example Amazon or eBay, the marketplace will be responsible for collecting and accounting for the VAT.
David added: “To compound the problem, Amazon is also insisting that from 1 January, EU and international sellers such as American or Chinese merchants selling items to both British and EU shoppers will have to split their stock and hold some in Amazon’s UK warehouses. That involves significant new transport costs and red tape for overseas sellers.”
The costs involved in these changes may well reduce the choice and increase the cost of items available to UK buyers in the future, warns ParcelHero.
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