The new EU VAT rules will cost British SMEs £180 million of red tape

The new EU VAT rules will cost British SMEs £180 million of red tape



According to a consulting company, due to the EU’s comprehensive VAT reform on sales outside the group, e-commerce sellers in the UK will face a red tape saving cost of £180 million.

This New rulesIt will be launched on July 1, and its original purpose is to prevent annual value-added tax fraud by non-EU e-commerce sellers (many of which are located in China), and it is estimated to prevent 7 billion euros of fraud. However, after Britain leaves the European Union, British companies also need to comply.

Small and medium-sized enterprises exporting to EU customers will face the greatest turmoil, as these changes eliminate the tax exemption for small and medium-sized enterprises and transportation of no more than 22 euros.

According to tax consulting firm Avalara, about 26,000 e-commerce sellers (just over 10% of the UK market) will have to register for VAT for the first time under the EU’s new “one-stop” system. Most of these companies will spend at least 8,000 euros per year, or a total of about 208 million euros (180 million pounds).

Richard Asquith, head of VAT at Avalara, said that the EU reform is the latest example of a British company’s deep trade ties with the EU. The company is “affected by our third-country status. Troubled”.

“Now we are not outside the EU, [the UK has] Contact with Chinese traders who avoid VAT, e-commerce companies will pay for it,” he said.

David Falkner, founding director of greeting card manufacturer Cardology, said that Brexit “shocked” his company’s sales growth in the EU, but he still plans to “overhaul his own system” to comply with EU measures, which will cost his company the EU One-fifth of income. He added: “This is an obstacle, but it is an insurmountable obstacle.”

In January, the UK implemented Similar VAT regulations for EU companies.Falkner said he “takes away some very good market share [his EU] The result.” He said: “We have already witnessed how much impact it will have. “Now, we face the same obstacles. “

Andy Mulcahy, director of strategy and insight at IMRG, the online retailer industry association, said that in order to comply with regulations, the company will need “big changes.” He said: “The key is to ensure that the software can enable VAT payment at the point of sale.” “It will take some time for this technology to become stable, but my feeling is that it will stabilize after a while.”

Before Brexit, UK micro-sellers were able to use the simplified EU program, which enables them to fulfill EU VAT obligations through the annual UK VAT return. After that, the UK Revenue and Customs will allocate all EU dues payment.

Now, exporters using electronic sales platforms will have three options when trading with the EU: register for VAT in the countries/regions where they sell most of their products, the European Commission estimates the cost is 8,000 euros; subcontract VAT to Amazon or eBay and other sales platforms; or require the postal service department to handle value-added tax.

Asquith recommends that since sellers are usually charged about 30% of the total price of VAT services, it is recommended that companies that conduct more than 150 transactions per year (including most companies doing business in the EU) are in the group.

James Sibley, head of international affairs for the Federation of Small Businesses, said the committee’s one-stop import procurement approach will simplify the lives of small exporters, although it still puts them at a disadvantage in the single market. status.

He said: “Small businesses in the UK will lose the exemption for small consignments, and those in the group with annual sales of less than 10,000 euros will continue to enjoy a small holiday,” he said. He also urged the government to do more to ease the burden on small businesses after Brexit.

The CEO of the Greeting Card Association, Amanda Fergusson, said that the plan brings a double challenge of new costs and also adds complexity to small businesses, because these small businesses may not be able to meet the new regulatory requirements well. .

She added that some members that rely on EU sales have stopped shipping to the EU, and the situation is expected to deteriorate from July 1. , Will be scared to the exit. “she says.

HMRC said the government is helping small and medium-sized enterprises to transition to the new EU VAT system through its £20 million Brexit support fund, from which small businesses can get up to £2,000 to settle the value-added tax and other issues.

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