New VAT Rules for Goods Imported into the United Kingdom

VAT rules before July 2021 Until 1 July 2021, businesses inside and outside the EU selling goods to consumers in the European Union could bring goods into the EU without charging VAT, provided the shipment's value did not exceed €22 (the low-value consignment relief). The aim was to ease the burden on customs authorities of checking a large number of shipments for the sake of a small amount of potential tax revenue. Sellers based in the EU were not happy with this arrangement, since they had to charge VAT when shipping goods from within the EU, which put them at a price disadvantage. This relief also encouraged fraud, such as deliberately understating the value of goods to avoid VAT. Changes to VAT Rules from 1 July 2021 From 1 July 2021, the EU abolished the €22 VAT exemption threshold for imports. Sellers, both inside and outside the EU, now have to charge VAT on sales of shipments worth up to €150/£135. Above that amount, import duty also applies. This means that all goods shipped directly from the United Kingdom to consumers in the EU are subject to local VAT in the customer's country of residence. The IOSS System - A One-Stop Shop The obligation to declare and pay VAT in every EU member state can be complicated, which is why the EU introduced the IOSS (Import One-Stop Shop) system for imported goods worth up to €150. If the seller is not registered for IOSS, the buyer has to pay VAT and a customs clearance fee. Registering for IOSS removes these unexpected charges. Registering for and Using IOSS Registering for IOSS simplifies the process, requiring only a single VAT return, with the tax authority splitting the tax between the member states. Returns are filed monthly, and registering in an English-speaking country such as Ireland can be easier. How IOSS works, an example: A company sells a toy to a German customer for €15. The seller can either zero-rate the sale and tell the customer they may need to pay import VAT, or register for IOSS and charge German VAT at checkout. Summary If your total sales to EU consumers come to €150 or less, registering for IOSS should minimise administrative costs and improve customer satisfaction. For shipments above €150, which fall outside the scheme, it may be simpler not to register for IOSS and to handle VAT the same way for every shipment.