UK marketplaces to be hit by triple tsunami on VAT and customs in January 2021
Marketplaces trading in the UK are set to be hit by a triple tsunami of customs obligations and VAT charges after 31 December 2020. These arise from the end of the Brexit transition period, and HMRC’s new rules on imports and cross-border marketplace VAT liabilities.
The changes also seek to tackle the stubborn €7 billion ecommerce VAT fraud gap, with member states looking to close import loopholes and co-opt online marketplaces into collecting VAT in place of sellers – the ‘deemed supplier’ rules. Failing to understand the new 2021 rules for marketplaces and their sellers will mean:
- Major import tax costs and fines;
- Goods held-up at ports; and
- Upset customers.
What are marketplaces’ 2021 hazards?
| 2021 Changes | Risks | Impact for marketplaces |
| 1. UK leaves the EU Customs Union and VAT regime | UK or foreign sellers will incur import VAT and tariffs for the first time on imports into the UK or into the EU from the UK. Most sellers have no experience of customs declarations, commodity code or tariff calculation requirements. | Nasty delays and hefty tariff charges for marketplace customers.There is a real risk that these customers will not come back! |
| 2. VAT on all imports to the UK | HRMC is withdrawing the £15 VAT-free threshold on goods sold from outside the UK to UK consumers. Instead, sellers (and marketplaces) will have to charge VAT at the checkout on imported sales not exceeding £135. Sales above this pay UK import VAT as today. | If the seller fails to do this, customs will return the goods or impose an unpleasant tax bill on the customer. Again, a terrible customer experience. |
| 3. Marketplaces take on VAT obligations | HMRC will require marketplaces to become the deemed supplier for some imported sales not exceeding £135. This means the marketplace must calculate the tariffs and VAT, and bill the customer in checkout. Marketplaces are also VAT liable for facilitated sales of any value by their non-UK sellers. | Failure to do so will result in goods being blocked at UK ports, with frustrated customers and sellers. The marketplace will also be censured and potentially fined by HMRC. |
Avalara’s fully automated solutions for ecommerce VAT will cut friction, keep sales transactions flowing for marketplaces and can be implemented this year:
- Avalara can simply integrate its fully automated import VAT and tariff calculator tool into the marketplace UI and checkout to get the new taxes right in real time. This ensures there are no additional nasty charges on unsuspecting customers.
- Our dynamic HS commodity code tools mean that whoever is responsible for clearing the goods into theUK or EU gets it right and avoids customs hold-ups.
- We can provide fully integrated, white-labelled or simple outsourced VAT reporting for the new HMRC import regime. This means marketplaces or sellers are not blocked by HMRC and the customer’s choice or experience is not jeopardised.