The new EU B2C distance selling regime that came into force in July 2021 has affected all the supply chains from UK businesses trading with the EU to the end customers. In this article we explore how out clients have been coping since the introduction of the new IOSS and how we can help them to adapt to the new rules. Most of our clients are already geared up for the new challenges and are operating smoothly in the new environment.

The new scheme has been introduced to equally affect both EU and non-EU businesses. The previously established distance selling thresholds have been abolished and new rules have been introduced so the EU member states benefit from VAT revenue.

The new scheme includes EU One Stop Facility (IOSS) for consignment of up to €150 in value which has replaced the previous small consignment relief. This facility covers collection, declaration, and payment of VAT on behalf of UK sellers. The following factors should be considered to ensure compliance with the new rules:

• Businesses who sell goods and services with the value of under to €150 per each transaction can register for IOSS
• Businesses who register for IOSS must appoint a EU representative
• Businesses who sell goods and services for the value over to €150 must register fir VAT in each member state they trade.

Many businesses who trade with the EU in post-Brexit environment are facing the challenge of having to register for VAT outside of the UK. This decision mainly depends on the incoterms of sale. Many exporters investigate the possibility of setting up a warehouse in the EU and Northern Ireland. While the new scheme helps businesses avoid the need for multiple VAT registrations, it presents the challenge to cope with multiple VAT rates:

• Our clients are having to deal with increased compliance as businesses now need to keep evidence of sales and provide corresponding IOSS numbers to the customs declarant/ shipper.
• If the business has not registered for the scheme in good time, they have to pay VAT to the shipper at the time of collection.
• Many clients are strapped for cash do to Covid-19 and cannot afford to invest in new technologies to simplify the processes.
• New import VAT rules also create customs delays.
• Some challenges arise in adapting different VAT treatment depending on the value of sales (above or below €150 margin in the EU and above or below £135 margin in the UK)
• Numerous complexities arising in difference scenarios depending on whether the business sells in the EU, to the UK or the rest of the word.
• Some of our clients have only dealt with the EU single market and are now having to adapt to new issues of establishing who pays customs duty and VAT in each member state when the goods enter the customer’s territory.
• In multiple instances orders were delayed waiting for businesses to find solutions and appoint tax representative in the customer’s territory.

What UK-ACCUNTANT Do to Support Our Clients

• We will carry out the analysis of our clients’ working practices, supply chains and VAT exposure in other EU countries
• We will support clients to obtain local advice and make recommendations on this basis
• We will provide bespoke solutions to every client depending on their needs.
• We keep our clients up to date with new regulations and requirements, provide new margin details on EU sales and advise on profitability of certain EU markets.
• We provide cashflow information on a regular basis to help plan EU VAT payments and refunds.
• We encourage our clients to register for IOSS
• We can help with duty deferment scheme registration and prepare monthly reports for submission by the EU representatives through IOSS.
• Some larger clients may need help with registering a subsidiary in a EU member state, mainly Ireland and France due to their close proximity to the UK.
• We also encourage our clients to invest into more up-to-date accounting software to facilitate a seamless upload of al the required details into IOSS.
• We assist our client with every aspect of transition to the new system to reduce the impact of hurdles and additional administration, including EORI and XORI registration numbers.
• We assist with registering for OSS and IOSS and identifying which sales go on which return.
• We can undertake a supply chain analysis, set up new entities, create new VAT registrations and help set up EU based structures
• We will provide advise on VAT, other tax implications and customs duties
• We support our clients in applications for funding schemes.

Advice and What to Do Next

Invest into a new subscription-based software to help you set up an online shop and sell your products. This software will automatically charge the VAT rate of the customer’s country and calculate the amount of VAT

Apply for new VAT registration in the EU member state of your supply and appoint a tax representative

Consider setting up a EU warehouse in the EU member states if necessary to cut shipping and administrative costs to remain competitive.

Keep following updates on the new rules and practices. Check our Brexit Scenario Library for helpful tips and answers to the most common cases.

Register for IOSS and OSS schemes where appropriate.

Register for EORI and XORI numbers if importing into the UK or NI.

Seek expert advice and consider setting up a subsidiary and a EU member state.

Checklist for a UK Business Starting to Trade with EU Customers (uk-accountant.com)

Partial Payments versus VAT Bed Debt Relief. Bad debts for VAT purposes (uk-accountant.com)