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Brexit - EU VAT changes

Several key changes to EU VAT law are to be enacted from 1 July.

The first change is the abolition of small consignment relief which exempted items worth less than €22 from VAT. From 1 July, UK businesses can elect to join the new Import One Stop Shop, meaning that any shipments valued at less than €150 will need to have VAT charged at the point of sale (rather than having import VAT imposed). This VAT must be paid over via a new IOSS return, made every month. UK businesses need to register in a single country for the IOSS. It is intended that this will be a simpler method than requiring the customer to become the importer of record (and therefore responsible for all customs paperwork and charges).

One complication is the requirement for non-EU businesses to appoint a local intermediary. As the intermediary may be jointly and severally liable for any VAT debt, the charges for this can make EU selling a very expensive option. It is hoped that the UK will be exempted from the requirement by the time the scheme is in place, but this remains to be seen at the time of writing. Of course, as the IOSS is optional an alternative is to simply continue with the situation that has been in place since 1 January, i.e. payment of import VAT.

The distance selling thresholds (of €35,000 or €100,000) are being withdrawn from 1 July and replaced by an EU-wide threshold of €10,000. The Mini One Stop Shop (MOSS) is being replaced by a significantly extended version with the One Stop Shop (OSS). The non-Union version of the scheme is also expanded for non-EU established businesses selling services on a B2C basis to EU customers, to include services subject to EU VAT, i.e. where the place of supply is in the EU. Previously, only a limited range of online services (e.g. telecommunications) were covered under MOSS but under the new version, all services will be included.

Information on both schemes is available here.

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