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VAT Update (for EU Sales)

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So the next phase in our nightmare saga called "Brexit" is "wading through all the info about VAT registration in the EU and finding out after spending several hours reading through several headahces, that it's all optional - at least I think it is".

corsetry supplies at sew curvy

I asked my accountant about the impending rule that UK businesses will have to register for VAT in one EU country, then apply VAT to EU sales, then pay that VAT to the EU every month.

Nowhere in the 'official' information given out by HMRC - at least for us mere mortals - is there any suggestion that this is infact optional, but this is Brexit Britain where nothing is clear, least of all things that used to be perfectly simple.

Nevertheless, my accountant did some digging and discovered the following.

Option 1: Businesses can register for VAT in one EU country who will administrate the VAT responsibility for the EU VAT.  Most Brits are choosing Ireland because of language.  To do this, the business must appoint a 'specialist' (accountant) who will set up the system for a fee of around £2k, then charge a monthly fee to keep you right.  You also have to register on the online platform IOSS to help you do this.  So that's quite an outlay in addition to the monthly accountants fees and the VAT payments themselves.

Option 2: Businesses can carry on as they are without registering for VAT in an EU country.  Packages sent to the EU will simply be taxed at the border, as they are now.

Source

We can therefore draw a few conclusions:

1. The main reason for a business registering for VAT in the EU is for customer convenience - to save them having to pay customs on their packages before delivery.

2. The set up fees and ongoing monthly fees and additional admin, is not sustainable for small and micro businesses

3. The business turnover for EU sales must be over £10k - more to make it economically viable.

Sew Curvy pays VAT from profits.  This is the case with most businesses in the UK.  Prices 'include' VAT but VAT is not added to the price of the product to start with - (it's complicated!).

Obviously as I have reported before, our sales to the EU have dropped quite considerably since "B-day", and so for the time being, we will not be registering for VAT in the EU.  We will continue to send goods into those countries but these will be subject to customs at the border.

sending corset making supplies to the EU from the UK

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