Post-Brexit cheat sheet: Shipping between the EU and the UK

Learn how to make your business Brexit ready 

Factors for shipping between the EU and the UK

To understand the impact that Brexit has on you as an online retailer selling into the UK from the EU, it is important to understand what has changed. The changes include a few key factors:

• Customs declarations are required between Great Britain (England, Wales, and Scotland) and the European Union
• Commercial invoices are required for shipments moving between Great Britain and Northern Ireland as well.
• UK VAT Law
• EU VAT Law
• Zero-Tariff agreement (preferential origin)

Before Brexit 

Before Brexit, the UK was part of the EU, which means there was no need to go through the hurdle of customs clearance when shipping from one to the other. Let’s look at two examples to make this a little more clear:

• Shipping from the EU to the UK: No customs clearance process or import fees were involved.
• Shipping from the UK to the EU: No customs clearance process or import fees were involved.

From these examples, you can see that the key factors listed above (Customs clearance, VAT, and preferential origin) weren't considered for EU -> UK or UK -> EU shipments. Well, now they are!

Post-Brexit 

Shipping between the EU and the UK has become more challenging because of customs clearance and VAT rules, but it’s not all bad. Let’s take a look at each factor that now affects shipments going between the EU and the UK.

Customs clearance 

Shipments between the EU and the UK are now subject to the customs clearance process. Any applicable import fees such as VAT, duties, or other fees will now apply. Each EU country has its own set of VAT rates so the tax amount will depend on the country of import. Furthermore, shipments must be accompanied by a commercial invoice to show the value of the items in a shipment, the shipment charges, etc. This is important because incorrect values may result in incorrect duty and VAT being charged; your shipment may even be held for inspection if the commercial invoice information is not accurate.

Only goods valued above the de minimis value of the country of import are subject to duty:

• EU duty de minimis: €150
• UK duty de minimis: £135

New 2021 VAT laws 

Post-Brexit, shipments moving between the EU and the UK may now be subject to VAT. The UK and EU each have their own VAT rules, which started in January and July of 2021, respectively.

UK VAT law

Not only may EU -> UK shipments be subject to VAT since Brexit, but the UK now has its own rules for charging and collecting VAT. The UK has changed the way VAT is collected on low-value imports (orders valued at or less than £135). VAT collection on these orders is now the online retailer's responsibility at the time of checkout on their website. The £15 de minimis has also been taken away, meaning that every order entering the UK may be subject to VAT regardless of its value. Online retailers exporting low-value orders to the UK must register for a VAT number with Her Majesty's Revenue and Customs (HMRC) and remit the collected VAT quarterly.

EU VAT law

The EU has also implemented new VAT guidelines effective July 2021. Like the UK, it provides online retailers with a new method of VAT collection on low-value imports (orders valued at or less than €150). Online retailers can allow the carrier to collect and pay VAT or use the IOSS (Import One-Stop-Shop) method, which requires registration for a VAT number and remittance to the EU country of registration monthly. However, the key change in the EU VAT law is the de minimis value of €22 being taken away. Effective July 1, 2021, every order shipped into the EU will be subject to VAT.

Don’t panic just yet! We have some good news for those shipping between the EU and the UK: Preferential Origin.

Zero-Tariff Agreement (preferential origin)

The Zero-Tariff Agreement between the UK and EU allows for goods of preferential origin to be duty exempt. Preferential origin simply means goods of UK or EU origin or the materials used to manufacture are of UK or EU origin, get preferential duty-free status. The type of goods will determine what percentage of the materials have to be of EU or UK origin. To have the goods ship duty-free, the preferential origin needs to be stated on the commercial invoice.

Now you’re ready to ship between the UK and EU! Here are some final key points to remember to get your business Brexit-ready for EU -> UK and UK -> EU shipments:

• Be prepared for your shipments to go through customs clearance and incur all the possible fees that may come with this (VAT, duties, etc.).
• If you’re shipping low-value orders into the UK, you must register for a VAT number and remit to HMRC quarterly.
• If you’re shipping low-value orders to the EU, you can let the carrier collect and pay the VAT or you can register for an EU VAT number, and collect and remit VAT monthly.
• The de minimis values for both the UK and EU have been taken away; therefore, all imports may be subject to VAT.

Feeling overwhelmed?

Now that you know what to consider when shipping between the EU and the UK, you may be feeling like it’s a lot to manage. Zonos can help you with this.

Why Zonos? 

Zonos specializes in accurate landed cost and cross-border ecommerce with software to make international selling simple. Zonos stays on top of the non-resident country taxation for Landed Cost guarantee customers by keeping track of thresholds for each country and collecting taxes at the appropriate time, so you won’t over or under collect, along with remitting quarterly taxes for you to each government entity.

Stay tuned for part 4 of our Post-Brexit shipping cheat sheet blog series next week: Post-Brexit shipping cheat sheet: Rest of world (ROW) -> EU shipments