The United Kingdom will terminate the transition period of the EU at the end of this year, and the new policies will be implemented on January 1, 2021, and the VAT tax reform is related to the interests of cross-border e-commerce sellers. Following our previous article "| UK new tax policy will be implemented, platform withholding and payment of VAT, sellers still need to register and declare VAT? Green Circle UK accountants in the repeated careful study of HMRC official website about "when goods from countries outside the United Kingdom into the United Kingdom, sold to the local customers in the United Kingdom, will be implemented VAT new rules", and then come to give you a comb dry goods. What are the potential loopholes and hidden dangers of this tax reform? What is the impact on sellers?
UK Tax Reform Regulations
Q1 What are the circumstances under which a seller does not have a VAT registration obligation?
Green Circle: According to the new rules of the UK tax reform, the UK out-of-boundary enterprises through the OMP platform sales, sales occur when the goods are stored in non-UK countries, shipped from outside the UK to the UK consumers (that is, we are often referred to as direct mail parcels), regardless of the value of the goods is how much (whether or not there is more than a single piece of £ 135 single consignment of goods), the seller is not a VAT registration obligation.
*This can be verified in the UK VAT registration time, the UK tax authorities for foreign enterprises, through the OMP platform sales of direct sellers refused to issue VAT tax number.
Q2 Why is there no VAT registration obligation for sellers of direct shipments from outside the UK who have an OMP platform involved in the sale?
Green Circle: After the new policy, for goods under £135 entering the UK from outside the UK on a single consignment (Consignment), with OMP platforms involved in sales (e.g. eBay, Amazon), there is no import VAT and import tariffs, but instead, sales tax is levied in the "sales chain" (Supply VAT) and withheld and paid by the OMP sales platforms on behalf of the sales VAT. （Instead of import VAT and import tariffs, sales tax is levied in the "sales segment" (Supply VAT) and withheld and paid on behalf of the sales by the OMP sales platform.
*Here's the kicker, but for direct shipments over £135, HMRC does not require the sales platform to pay on your behalf! For single consignments over £135, there will still be import VAT and customs duty, which will be charged at the point of import as before.
Q3 Who is responsible for paying and collecting the tax on behalf of the seller for direct parcels with a single consignment of goods over £135, where the seller has no VAT registration obligation?
Green Circle: By UK consumers or logistics companies, based on eBay and Amazon's policy of favoring consumers, it is most likely that logistics companies will collect and pay import VAT and tariffs on behalf of consumers, and this part of the import VAT will be declared and paid by logistics companies.
Q4 Are there any loopholes and pitfalls in this tax reform by the HMRC?
Green Circle believes that the United Kingdom this reform in the customs clearance is to provide small and medium-sized enterprises importers to facilitate customs clearance, the realization of green customs clearance. With the previous application for customs clearance deferred differently, the previous application process is only friendly to the local large enterprises in the United Kingdom, small and medium-sized enterprises due to the lack of bank guarantee, basically unable to apply for customs clearance deferred, then now realize the green customs clearance, the import VAT payment link delayed, you can fight for small and medium-sized enterprises to obtain more cash flow.
But at the same time the initiative is also accompanied by the potential risk of tax fraud, the risk of the local financial forum in the United Kingdom has led to heated discussions, the existing input tax credits, against unreasonable input tax returns, there will be HMRC repayment department to intervene in the control. However, after the tax reform, some tax experts pointed out that due to the combination of import clearance and VAT reporting, HMRC and Customs and Excise Department's control of input tax will be significantly weakened.
Q5 What are the circumstances under which the Inland Revenue Department does not compel sales platforms to withhold and pay VAT when participating in sales through OMPs under the new UK tax reform policy?
Green Circle: There are 2 main scenarios.
1、Sellers whose goods are outside of the UK and the value of a single item shipped direct exceeds £135;
2, goods warehousing in the United Kingdom, the United Kingdom local company established sellers.
Q6 How should I report business-to-business transactions (B2B)?
GREEN CIRCLE: In the case of B2B, the UK corporate buyer can provide their own valid VAT number to the UK overseas seller or the UK sales platform, then the obligation to declare VAT is transferred to the UK corporate buyer; the sale will be declared as a Reverse Charge (the e-commerce platform will not withhold and pay the tax on the B2B order but the overseas seller still (e-commerce platforms will not withhold tax on B2B orders, but overseas sellers will still need to file B2B).
Q7 What is Reverse VAT Taxation?
Green Circle: Reverse Charge is a simplified process whereby the buyer is responsible for filing the VAT return, thus avoiding the hassle of international sellers having to register the VAT in the buyer's country, which is also referred to as a tax transfer. Reverse Charge is only applicable to trade in services and B2B, not to trade in goods and B2C.
Q8 What is the difference in the import declaration for UK FBA or UK Overseas Warehouse shipments?
Green Circle: With this tax reform, the UK Customs and Excise Department should introduce a way to identify whether the address of a single shipment belongs to a UK overseas warehouse address or a UK consumer's private address.
The original destination for overseas warehouse address of the goods, regardless of the value of goods (whether more than £ 135), need to pay import vat and customs duties when the goods enter the customs, the Inland Revenue Department will generally send to the tax agent address C79 (VAT aggregation certificate), to prove that the actual amount of VAT paid in the month. However, the most significant change in the new import VAT declaration is the introduction of "Postponed VAT Accounting", also known as "Customs Clearance VAT Deferral".
According to the new regulations in January 2021, importers can use "Customs Clearance VAT Deferred Postponed VAT Accounting". As the name suggests, that is, importers "no longer need" in the goods at the time of customs on the payment of import VAT, but directly in the sale of VAT declaration can be filled out, that is, tax links from the customs clearance node, transferred to the VAT declaration node, if the seller of imported goods are used in the sale of goods will be realized without refunds and non-payment.
The IRS will give the importer an Online Monthly Statement each month to check against the Postponed Import VAT.
Q9 Has the Inland Revenue abolished the low rate of Flat vat after the UK tax reform?
Green circle: at present in the HMRC official website does not target UK local companies or companies outside the UK to cancel the Flat VAT low tax rate update, but precisely because the goods stored in the UK territory of the non-UK enterprises), through the OMP platform sales, sales VAT by the OMP withholding, to OMP's sales volume is not in line with the Flat VAT tax standards (one year's total sales within the (total sales in a year within £ 15w to apply for, cumulative annual return of more than £ 23W withdrawal).
Therefore, flat VAT is no longer suitable for application by UK enterprises outside of the UK which are subject to OMP's withholding and payment. However, if it is a UK local enterprise, it is not within the scope of the current tax reform requirements (not to be withheld by the OMP on behalf of the payment of VAT), and in the UK local enterprises that meet the scope of the Flat VAT sales volume, they can continue to use the Flat VAT to file their own VAT returns.
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