Post-Brexit cheat sheet: Shipping into the UK

Welcome to part 2 of the Post-Brexit shipping blog series! Online retailers outside of the UK or EU shipping to the UK, this post is for you! You may have read our previous blog post outlining the need-to-knows for the following types of shipments:

• Rest of world (ROW) -> UK
• EU -> UK; UK -> EU
• ROW -> EU

This post will highlight in detail what online retailers outside of the UK and EU need to know about shipping into the UK. If you recall, UK VAT on low-value orders is the main factor that you need to consider for shipping into the UK. Our UK-based expert is going to decode the UK VAT scheme and make it as simple as possible.

Enter James Marley.

Brexit for dummies: UK VAT 

I want to break down the new UK VAT rules for you Barney-style! (yeah, the purple dinosaur) Forgive me for writing so informally – this isn’t how I normally do things. It’s just that having read all the other guides online about Brexit and VAT, I’m now 1- bored, and 2- bog-eyed due to all the industry jargon, double negatives, and unnecessarily long sentences! After China and the US, the UK is the third-largest ecommerce market in the world.

The English language and a strong GBP make this an attractive market for online retailers. However, unexpected VAT and clearance fees caused by the new UK VAT rules are affecting consumers and retailers negatively; goods are being refused, consumers are being put-off, and retailers are being hit with return fees and additional risk caused by a lack of VAT compliance. The thing is… it’s not that complicated; so why all the problems? The lack of understanding surrounding the post-Brexit UK VAT changes is the source of the issues. Let’s break it down.

What’s changed? 

Before Brexit The following is an oversimplification but effectively all you really need to know about UK imports before Brexit.

• Only goods over £15 were subject to VAT
• Only goods over £135 were subject to DUTY

For an ecommerce shipment sent through a carrier such as UPS, FedEx, or DHL from the United States to the United Kingdom, if VAT and duty were owed at customs, the carrier would pay it on the seller’s behalf, and then invoice either the retailer or the end-user for the amount they paid. Not too complicated, right? Apparently, it wasn’t complicated enough because they changed the rules at the beginning of 2021.

It’s important to understand why they changed the rules because this helps understand the rules themselves. They changed them because non-UK retailers had an unfair advantage when selling low-value goods into the UK.

To put things into perspective, here’s an example... Before Brexit, I could buy a tea-pot (!) in the US and have it shipped to the UK – no duty would be owed because it was under the £135 threshold and no VAT would be owed because it was under the £15 threshold (that’s a cheap American tea-pot).

If I bought this same tea pot in the UK I’d have to pay 20% VAT on it. That’s not fair to the UK tea-pot industry. Therefore, the new rules allow the UK government to make more money and level the playing field. What did the rules change to?

Post-Brexit 

Again, it’s not complicated.

• The £22 threshold for VAT is now gone for all the above reasons.
• The UK tax authority (Her Majesty’s Revenue and Customs) also now requires VAT to be charged at the point of sale on your website for low-value goods (valued at under £135). Once you’ve collected this VAT, they then ask that you send it to HMRC (The Queen) quarterly. Please don’t include any requests for ‘representation’ with this taxation.

The duty rule is still the same; only the VAT bit has changed.

What do I do? 

If you have already started selling low-value orders into the UK as of January 1, 2021… You will need to register for a UK VAT number and remit the VAT that you’ve collected – this involves filling out a bunch of forms. They’re probably a bit dull, but not prohibitively complicated and the process does not require a registration fee.

If you haven’t but want to start selling into the UK… It’s the same; you’ll need to register and remit!

Still feeling overwhelmed?

In addition to Zonos’ documents and guides that can help you to better understand UK VAT, we offer several ways to assist online retailers outside of the UK [and European Union] who wish to or have been selling into the UK.

Why Zonos? 

If you sell or plan to sell low-value orders to the UK and need help or want it to be easier, see some of our solutions for online retailers below.

Zonos Landed Cost

Landed Cost will calculate import duty, taxes, and carrier fees, with the ability to prepay them from within your platform or checkout, providing a seamless cross-border experience for your customers. This is helpful for merchants outside of the UK selling into the UK because it takes the burden of VAT [and other fees] calculations off of you.

If you are a retailer and want to start selling into the UK you’ll fall into one of two categories…

• A seller using Shopify or BigCommerce
• A user of another platform.

For users of Shopify or BigCommerce looking to get started with Landed Cost, you can go to the app store and download the Zonos Duty & Tax App. The setup wizard is easy and, if you have any questions, you can set up a time with one of our onboarding actual wizards to help you out. If you’re not on either Shopify or BigCommerce then you can use our APIs. If you’re on Magento, Miva, XCART, or SalesForce, keep reading...

Zonos Checkout

Checkout allows you to offer international payments in your customers’ own currency, a localized checkout experience, international fraud protection, abandoned cart emails, and other useful features designed for international selling and works with your existing shopping cart platform. Zonos International Checkout has plugins available for BigCommerce, Magento, Miva, XCART, and SalesForce, and API or JS integration options for everyone else.

Zonos Landed Cost guarantee: Recommended

Any retailer currently using Checkout or Landed Cost can sign up for our Landed Cost guarantee. Landed Cost guarantee ensures landed cost accuracy for every international sale, and will also manage all non-resident country taxation schemes (UK, AU, NZ, NO, etc.) by tracking country thresholds and collecting taxes for you only when the threshold is met, so you never over-or-under collect on taxes, and will remit those taxes to the appropriate government entity so you don't have to worry about it!

Coming soon...

Our next blog post (part 3 of the series) will highlight EU -> UK and UK -> EU shipments because there are some additional factors to consider if you’re shipping between the UK and the EU.