New EU rules stop 65% of UK small businesses trading with EU customers
From the 1st July 2021 the European Union (EU) introduced new rules on how VAT is accounted for on cross-border trade. The changes mean that businesses selling goods valued at €150/£135 or below to customers in the EU will have to charge import VAT.
A recent poll of small businesses in the UK showed that as a result of the new rules 65% of small business owners have been put off taking orders from EU customers. For 56% the reason for this decision was because they did not fully understand the changed rules. A further 22% were worried about the cost implications for their business.
Poll respondents included small businesses from across the UK selling goods including homeware, clothing, gifts, cosmetics and jewellery. A third of respondents stated that they would regularly have received orders from EU customers.
The main area of confusion for small business owners is how to calculate, collect and pay the VAT due on sales. The new EU ‘Import One Stop Shop’ system (IOSS) is designed to make accounting for VAT easier however the rules also state that GB businesses must use an intermediary to sign up for an IOSS number. Businesses using an online marketplace, such as Amazon or Etsy, can use the marketplace’s IOSS number. Alternatively, businesses with their own website can integrate with online systems to work out and pay the VAT due.
The new VAT rules have only added to other Brexit induced changes on trade between GB and the EU for example on packaging, hallmarking and cosmetic regulations, collectively creating major stumbling blocks for local businesses trying to trade with customers in the EU.
Online homeware retailer, Ross Martin owner of Unfound Home, commented on the new rules stating: “As a UK based online business, we strive to be able to diversify our income opportunities. Due to Brexit and the new regulations we face, if we wish to sell to EU countries, we now have to be EORI registered and abide by the import and export duties regulations as a company. These are additional strains on small businesses. We are in a catch twenty-two scenario if we do not take the risk, we cannot reap the reward.”