January 2021 was the first month the UK did not belong to the EU According to According to the UK Office for National Statistics, exports to the EU fell 40.7% in January compared to December 2020. Since then UK exports to the EU have slowly picked up, but they have not returned to their pre-Brexit levels.
Exports are more than huge shipments between multinational corporations. They also include the sale of goods from UK based e-commerce sites.
Selling and shipping to consumers in the EU was straightforward before Brexit. It is now much more difficult, especially as EU customs and VAT rules tighten on July 1.
EU VAT changes
Prior to July 1, the price displayed on a UK website included UK VAT. This is what the customer paid for. There was no additional charge. The price should now no longer include UK VAT. Instead, the EU customer must pay VAT at a rate set by the destination country and import duties. A UK seller has two options for handling EU VAT. The first is do not disturb, and the EU customer pays the delivery company upon receipt. This could easily result in, say, a $ 40 item costing $ 30 more.
The second option for non-EU sellers is to calculate and charge VAT at checkout, then record and remit it to the appropriate country. This, however, could be a serious administrative headache as the EU has 27 member countries.
An alternative after July 1 is the “Import a one-stop-shop, ”Or IOSS. Non-EU sellers can register in an EU country and then pay monthly VAT for all EU sales, in all countries, on this portal. This allows the EU customer to pay VAT at checkout, thus avoiding an unexpected invoice.
There are, however, several captures. On the one hand, traders have to charge the correct VAT according to the destination country. Second, the e-commerce software must integrate with the portal of the chosen country. And most importantly, you cannot use IOSS if the order exceeds 150 €.
In short, it’s a lot of work for non-EU traders to sell to EU consumers. Many traders may not care.
To date, most consumers in the EU are confused by the new rules. Either they refuse the delivery, leaving the ecommerce company to pay the return shipping cost as well as reimburse the customer for the original purchase cost, or they pay and complain. They can even cause chargebacks.
Many UK e-commerce companies have stopped shipping to the EU, leading to declining export figures. And it’s not just the small businesses that have stopped. John Lewis, the large mass merchandise retailer, has temporarily stopped selling in the EU pending new regulations. But small traders may opt for a permanent cessation due to the additional administration.
An alternative to paying monthly VAT in 27 countries is to open a warehouse or use a distribution center in the EU. Place the goods in a country and you will only have one VAT to manage. Then ship the orders within the EU from this warehouse and completely avoid the additional VAT.
Ireland is the obvious choice for the UK and other English speaking sellers, but its geography stands in the way – postage is not ideal. A country in continental Europe can be better. The best location will depend on what you are shipping, how you get your inventory to the warehouse, and where your customers are located.
As Covid-19 has changed the buying habits of consumers – of brick and mortar online – many UK-based e-commerce retailers have sought to increase their domestic sales to make up for the loss of EU.
Thus, the pandemic has mitigated the effects of Brexit on UK e-commerce sellers. Exports are down, but domestic activity and turnover remain good. The UK-EU division has changed e-commerce. He didn’t necessarily damage it.