Lower value imported goods now 20% more expensive (including Aliexpress) - an early bite of Brexit

[umfana]

European regs made it possible to import goods valuing less than €22 without paying VAT. From the first of Jan this is no longer the case with VAT being due from the supplier.

Most of my brewing supplies from Aliexpress were under this level and so exempt from the VAT but no longer.

Here is the wording from Aliexpress.

"From 11PM 31 December 2020, AliExpress is required by law to collect UK Value-Added Tax (VAT) at the applicable rate and remit to the UK tax authority when goods are sold to UK customers (i) where the goods are located outside the UK at the point of sale with a consignment value of GBP135 or less, or (ii) where the goods are in the UK at the point of sale, but sold by an overseas seller. "

 

[foxbat]

I've been warning about this for ages. These new rules were originally an EU directive to prevent VAT fraud (mostly originating from China) and scheduled to come into effect on 1 Jan 2021:

https://ec.europa.eu/taxation_customs/business/vat/modernising-vat-cross-border-ecommerce_en
Because we were in the EU at the time we also adopted the new rules. The HMRC take on this is here:

https://www.gov.uk/government/publi...s-goods-sold-to-customers-from-1-january-2021
Because of Covid the EU-27 decided to postpone the implementation to 1 July 2021 but HMRC decided to go ahead as originally planned.

The bottom line is that all 'platforms' are required to collect VAT and remit to HMRC for goods under EUR150 which was translated to £135 at the time.

Big players like ebay, ali-express and amazon have come on board. Smaller players with their own web stores may decide not to ship to the UK if they decide that being an unpaid tax collector for a foreign government isn't worth their time. If there is such thing as a private website in China with an international storefront then they may just not give a toss and continue to ship anyway.

 

[Appleyard]

Because of Covid the EU-27 decided to postpone the implementation to 1 July 2021 but HMRC decided to go ahead as originally planned.

The bottom line is that all 'platforms' are required to collect VAT and remit to HMRC for goods under EUR150 which was translated to £135 at the time.
( 8< )

If there is such thing as a private website in China with an international storefront then they may just not give a toss and continue to ship anyway.

So buyers in the eu will have the same situation as buyers in the UK anyway, after the end of June?


Re "continue to ship anyway", there's a whole web ( ) of subterfuge going on anyway. I bought an item from a vendor who assured me that "While customs duty may be payable, most parcels escape detection without problem. To insure against customs interception pay £0.XXp and in the event of interception, claim the duty back from us".

Ah. So.

 

[foxbat]

So buyers in the eu will have the same situation as buyers in the UK anyway, after the end of June?

Yes they will, assuming that the EU doesn't delay again. They're good at that.

The systems are far from bug-free yet. I noted that something I'd been watching on ebay had gone up 20% in the new year and I thought, whatever I'll buy it anway and when I clicked buy-now it had invisibly subtracted 20% from the auction display price when it showed me the final amount!

 

[Appleyard]

Probably best to buy now, I'd guess, 'cos if the eu gets its act together things may change then.

 

[BrewMeHappy]

I must be missing something about this. I was trying to find out the other day but drew a blank.

I can't get my head around this in such that how can HMRC have any jurisdiction over companies abroad and what they may sell to UK customers and force them to collect VAT on their behalf? In any case, how would customs possibly know if the VAT has been charged and paid or not as stuff comes in through the post etc?

 

[DavidB]

I am not an expert but have a bit of knowledge because of my job. I'm a buyer for a food company.

Under the new rules Vat liability is assessed at the point of entry into the Uk. Think this is a change and that VAT liability used to be asssssed at delivery/ when the contract is fulfilled. It's a bit complicated but liability is also linked to who is the contractual owner of the goods when it passes through the port of entry.
In this case if you are a foreign/Eu company selling to the U.K. via courier/post on a delivered basis, then the foreign company retains ownership/title of the goods until in effect, in this case, it passes through your letterbox.
SInce they are the 'owner' of the goods when they cross the country boundary they will be liable for the VAT charges. Since this is a cost to them they would want to pass it on to the consumer /end buyer via the original cost of the goods. HMRC ( Her Majesties Revenue & Customs) is getting this money by requiring all courier/postal services to register with them, these companies then pass this liability on to the users of their service by ensuring foreign users have to make a customs declaration/pay the charge when they send the goods. HMRC/Customs (in theory) assess all this at point of entry and if they think anyone's 'fiddling' anything they could return the goods/bin them or demand extra charges etc. That is what Ali Express is trying to avoid. In the past they weren't really that arsed about fiddling it, as the Vat/duty liability used to be liable at the point of delivery (i.e. The uk buyer got the bill from the Post Office etc). Under the new system they are directly liable. Iin the old system, sometimes we ( the buyer) got an extra bill, most times we didn't - but in any case it wasn't a risk to the Seller.

There are a lot more complicted rules/nuances based upon contractual law and geographical origin of legal entities but that's the basic principle.

The principle probably isn't really any different than any other country but when we were in the EU the was a 'tolerance' about the value of goods that would undergo this scrutiny, but up to now (and early days) it appears the new post Brexit HMRC has chosen to operate without this tolerance.
We all know that in the past most of the time ( but not all the time) packages from AliExpress have sneaked in under this radar/tolerance, however it now seems they aren't willing to take the chance any more since they will now pick up the bill.

Probably got some of this wrong but think that' the gist of it.

 

[BrewMeHappy]

Blimey. Sounds like a headache for the companies.

 

[jeg3]

The way I summarised it last week (and it agrees with the above) is that any company outside of the UK who wants to do business in the UK (i.e. ship to UK addresses from abroad) has to register to collect VAT on behalf of HMRC.

I would imagine the reason some companies have temporarily suspended trade with the UK is the overhead of paperwork plus the hassle of actually paying HMRC via international transactions.

Big companies are setup for international trade but for smallish outfits it's probably a huge burden and a double whammy of having to put up their prices to cover the VAT and increasing their costs with the customs declarations. I can see why some have suspended trade with the UK.

 

[Northern_Brewer]

Blimey. Sounds like a headache for the companies.

And that's just the VAT.

Then depending on the situation (admittedly it's more for business-to-business) you'll also need proof of origin, a compliant invoice in conformance with current customs regulations, a customs authorization document to process the customs clearance for both sender and consignee, and customs information like the commodity code. Welcome to the world of non-tariff barriers to trade - no wonder that DB Schenker have said that only 10% of their consignments are getting the paperwork right.

Of course, this raises the question of why Johnson said at the press conference to announce the deal "There'll be no non-tariff barriers to trade". Either he was deliberately lying, or the man who took "personal charge" (in January, April and December) of the biggest trade negotiation in our history, has no clue about the basics of international trade.

 

[umfana]

...
Because of Covid the EU-27 decided to postpone the implementation to 1 July 2021 but HMRC decided to go ahead as originally planned.

Ah my mistake thinking it was a Brexit driven outcome. Thanks for the clarification.
Still sucks. I expect fewer companies will want to deal with this island now. I read about a Dutch bike retailer that now refuses to do business with the UK.
So very depressing.

 

[LeeH]

I have just imported some equipment from exchilerator from the US and for the first time in 10 years I’ve dodged tax, import duties and parcel force fees.

Winner.

 

[Pavalijo]

Is there possibly an upside of this - stopping unfair competition in the U.K. from foreign companies shipping goods into the U.K. without paying tax. Now U.K. companies can step into the breach - importing in bulk and selling online or on high street, creating U.K. jobs and revenue for OUR HMRC?

 

[An Ankoù]

I ordered a CD from Amazon UK and was warned that Amazon was responsible for collecting the VAT and that any increase would be shown at checkout. When I checked out, I discovered that UK VAT had been deducted with no other additions. Result!

 

[An Ankoù]

Is there possibly an upside of this - stopping unfair competition in the U.K. from foreign companies shipping goods into the U.K. without paying tax. Now U.K. companies can step into the breach - importing in bulk and selling online or on high street, creating U.K. jobs and revenue for OUR HMRC?

Is this the revenue which the present government pass on to their cronies for things like track and trace systems that don't work, PPI which is substandard, free school meals, which wouldn't feed a mouse, etc, etc? I'm sure these lads love our HMRC while keeping their own tax affairs off-shore, of course.

 

[foxbat]

Is this the revenue which the present government pass on to their cronies for things like track and trace systems that don't work, PPI which is substandard, free school meals, which wouldn't feed a mouse, etc, etc? I'm sure these lads love our HMRC while keeping their own tax affairs off-shore, of course.

It's the revenue that pays for the NHS whose staff are selflessly putting their own lives at risk to save the citizens of the country you left.

Welcome to my ignore list.

 

[Pavalijo]

Is this the revenue which the present government pass on to their cronies for things like track and trace systems that don't work, PPI which is substandard, free school meals, which wouldn't feed a mouse, etc, etc? I'm sure these lads love our HMRC while keeping their own tax affairs off-shore, of course.

I think you may have a distorted view of the world.

 

[An Ankoù]

Peace Foxbat. I haven't left anywhere. I've simply relocated from one part of Europe to another, much as you might move from Essex to Manchester. Little islander thinking doesn't really cut the dash in the real world, I'm afraid. As for the NHS- such platitudes really militate against their cause; the NHS is understaffed and underpaid and they deserve better. There would be more funds to do this if the awarding of government contracts were more transparent and there was some real accountability, which is manifestly not the case with our current lot. Again, the NHS is (supposedly) funded by our National Insurance Contributions and as mine are fully paid up for 43 years, I'm fully entitled to the benefits I and my employers have contributed to over that time. So you'll be interested to know that I still get communications from my doctor's surgery and NHS dentist even though they know I live in France. I think they get a retainer for my being registered at their surgeries, but that's beside the point. I expect to get an invitation for my covid jab at any time, but I'll wait for it to roll out here.
In the meantime, lets support our front-line health workers by action and not claps and words. Here's my thought for the day. Enjoy:

 

[An Ankoù]

You further demonstrate a distorted view IMHO.

My daughter is a hospital pharmacist. Her Portuguese colleague is paid 3x what she was paid in Portugal. NHS pay increases have been protected in spite of the almost certainty that private sector staff will see no growth and many will see cuts.

PPE supply contracts were awarded by civil servants put under huge pressure to source vast quantities of goods with extreme urgency and with usual procurement rules set aside. Having been involved in NHS procurement I can say that whoever was in power they would have had to cut corners - and that inevitably led to mistakes.

The track and trace app was a disappointment - but again this would be down to the over confidence of IT experts and the current government is not alone here. The Labour government made a complete Horlicks of procurement of a new NHS IT system - wasting £26 billion on failed IT projects (not to mention complete profligacy on property procurement - my field). I’m not trying to be party political, just pointing out that mistakes happen and in dealing with a rapidly emerging pandemic those errors were inevitably amplified.

BUT I’m pleased that our government had the balls to behave as the private sector would have done to enable the pace of response required.

The rotten British press loved the opportunity of sensationalist reporting throughout this pandemic and sadly you seem to have been suckered into believing what you read!

For further reading look at the article in left leaning Independent: Labour's computer blunders cost £26bn

My daughter and her husband also work in the NHS.
I thoroughly agree with you about the rottenness of the British Press. Could you give me an example or two of what sensationalist reporting I might have been suckered by? Then I'll try to avoid it in future.
Your whataboutism in the last para might be of general interest, especially if our lot can learn something from said blunders, but what does it contribute to the here and now?
Anyway, I'll happily join you on another thread, but I don't think we're going to hit it off on this one.

 

[Bill_g]

Is there possibly an upside of this - stopping unfair competition in the U.K. from foreign companies shipping goods into the U.K. without paying tax. Now U.K. companies can step into the breach - importing in bulk and selling online or on high street, creating U.K. jobs and revenue for OUR HMRC?

Unfortunately, it seems to me anyway, that the real problem is the limited size of the UK market. If you take for example the DIY brewing market in the US or equally guitar making and other crafts, the US market is so large that it can support businesses offering a fabulous range of products at very low prices (accepting of course that purchase tax is generally much lower in the US & often not quoted anyhow). Like a lot of people I've enjoyed buying goods direct from China but let's face it we are robbing (ourselves really) of the UK tax & profits that could drive local business. The big problem is of course that assuming a UK business buys in goods wholesale at prices that we could have previously paid direct to the Chinese seller ourselves, then once overheads, profit & VAT are added then the price multiplier is quite painful. This in turn tends to limit the market size and a UK seller is forced to restrict their offering in order to make a decent profit and not hold large slow moving stocks. So as UK consumers we find ourselves back on the interational market looking with envious eyes at overseas supplier catalogues. But legitimate importing from the US for example is painfully expensive. Applied across the board our money buys us less and we are poorer.
Economically and politically our choice, I think, is whether to become a small back water or try to turn ourselves into a Singapore type economy with all the social depravation that will inevitably result from a low tax dog eat dog economy. I don't like it one bit but I believe that's the stark choice that faces us.
... I need a beer after that but it's far too early