A new Statutory Instrument (SI) SI 2018/1376 has been issued which sets out certain measures to be adopted in the event of a No Deal Brexit in respect of postal packets. A background to VAT and Brexit here
If the UK leaves the EU without a deal it will be unable to treat the movement of goods between EU Member States in the same way as previously. Such a movement of goods now become an import – similar to any other goods currently entering the UK from outside the EU. A guide to imports here
These regulations mean that certain overseas businesses will be required to register in the UK and pay import VAT on a consignment of goods up to the value of £135.
I have summarised below the most salient parts of the SI.
What is a qualifying import?
The regulations state that a “qualifying importation” is made where—
- A supplier supplies goods for a consideration to a recipient in the course or furtherance of a business carried on by the supplier
- the supplier is not established in the UK
- the goods are dispatched from a place outside the United Kingdom to the United Kingdom in a postal packet
- the value of the contents of the postal packet is £135 or less
- the postal packet does not contain goods of a class or description subject to any duty of excise
There are two exceptions (there always appear to be exceptions in VAT…)
- the supplier ensures that a UK-established postal operator has a legally binding obligation to pay any import VAT that is chargeable on that qualifying importation to the Commissioners
- a non UK-established postal operator has an obligation under an agreement with the Commissioners to pay any import VAT that is chargeable on that qualifying importation.
Requirement to register
A supplier must be registered under the new regulations with effect from the date on which the first qualifying importation is dispatched by the supplier. There is no de minimis limit.
Application for registration
- a notification of a requirement to be registered and an application to be registered must be made using electronic communications in such form and manner to be specified by HMRC
- it must provide such information as specified by HMRC
Returns
Returns will be known as “Postal Packet Returns” and will be quarterly and will be due on the first calendar day after the last day of the month next following the end of the period.
Penalties
This being VAT – of course there are penalties for getting wrong.
The penalty for failure to register is a flat rate of £1000.
The SI also contains regulations for others to be jointly and severally liable for that import VAT in certain circumstances. Further, as expected, (see here) the SI also removes Low Value Consignment Relief (LVCR) for the import of commercial goods with a value of £15 or less.
A No Deal Brexit will undoubtedly increase administration, red tape and cause delays and uncertainties, and VAT is only one aspect of that. Let us hope that this SI is not needed…