New VAT Rules for sending merchandise to the UK started 1/1/21

The authoritative announcement is here

Changes to VAT treatment of overseas goods sold to customers from 1 January 2021

The TLDR version from an email I got on a bookselling LISTSERV

<<The new arrangements will also involve the abolition of Low Value Consignment Relief, which relieves import VAT on consignments of goods valued at £15 or less.

Online marketplaces (OMPs), where they are involved in facilitating the sale, will be responsible for collecting and accounting for the VAT.

For goods sent from overseas and sold directly to UK consumers without OMP involvement, the overseas seller will be required to register and account for the VAT to HMRC.

<snip>

For most consignments not exceeding £135 in value, instead of VAT being collected at importation or delivery to the customer, VAT will be accounted for at the point of sale.

For VAT purposes the supply will be treated as follows:

• if an OMP is not involved in facilitating the sale, there will be a supply direct from the seller to the consumer, which will be deemed to take place in the UK and so liable to UK VAT
• if an OMP is involved in facilitating the sale, they will be deemed, for VAT purposes, to be making the supply to the UK consumer, which will be deemed to take place in the UK with UK VAT chargeable accordingly

In both instances the value of the goods for VAT purposes will be based on the price at which they are sold to the consumer rather than any valuation calculated at the point of importation.

For goods that are located overseas at the point of sale, the new arrangements will apply irrespective of where the OMP or the business selling the goods is established.>>


The upshot seems to be that if you sell a record from the US to the UK without the assistance of an online marketplace (eBay, Discogs, etc.) which handles taxation for you, you must calculate and collect the appropriate UK Value Added Tax at the point of sale - this will no longer be handled at Customs. You must then open an account with HMRC (Her Majesty's Revenue and Customs) in the UK and file tax returns there to arrange to pay them the money. One US sole proprietor who inquired about this was told he would then need to file a yearly income tax return in the UK.

The easy way out if you have an eBay or Discogs account is to make a special listing and refer the buyer to it, which of course entails paying them a commission which negates any possible price savings which may be passed on in a private sale.

Gifts apparently are not subject to VAT.

 

There's more news from Discogs on this now - they have stated that they will not be acting as an "online marketplace" under UK laws. US sellers who wish to sell to the United Kingdom must make their own arrangements to collect UK VAT and report and remit those funds to the UK tax authorities. Barebones instructions to do so are contained in their announcement.

United Kingdom VAT Regulations

Sorry, Brits - I love ya, but my Discogs items are no longer available to the UK.

 

How would UK authorities be able to "collect" such taxes from US sellers? Take us to the Hague?

 

Legally, you as the US seller exporting to the UK agree to collect these taxes for the UK. The 1/1/21 change is that the taxes are to be collected by the seller at the point of sale, not at the point of delivery. The seller must then establish a VAT account with the UK and submit quarterly tax returns to the UK. Read the Discogs document linked.

 

This will probably impact Discogs, and they may be forced to become the VAT collector despite wanting to pass on it. There is no incentive for an individual to sell to the UK, but there is an incentive for Discogs to have sales to the UK. Discogs, time to put on big boy pants, there is business to be done.

 

I'm guessing the point he was making was more along the lines of "How are they going to force us to do this?" or something along those lines. Which, is actually a very good question.

 

Don't blame you, but you'll probably be alright if you continue to do so and don't bother with the whole VAT thing. Just mark the package as a gift. The UK buyer would still be on the hook for the VAT but sending a gift means you, as the sender, do not have to charge, collect and remit VAT.

 

I doubt it. If Discogs voluntarily do this (legally they do not), they are now liable to collect and remit the VAT. I don't think they want to get involved at that level and will likely just accept that sales into the UK might be affected and hence, so will their commission earnings.

This is all a bit of mess and a huge overreach by the UK government IMO. It's absolutely ridiculous to expect some seller in East Fartville, Nowheresville, North America, to register, collect, report and remit VAT because they sell a few records into the UK over the course of year.

Discogs is still working on a solution to help sellers who want to adhere to these rules and I expect that they'll just have an option to automatically calculate the VTA at checkout.

 

A package entering the UK without the sellers VAT number on it as directed can be refused/sent back.

It's just the UK now, but the EU will be following in a couple of months. Discogs will either set up to collect and remit these import taxes as other online marketplaces do (and as they do for US sales taxes), or international trade through Discogs (and any money Discogs makes from it) will cease.

 

Yeah, this is what I figured would be the most likely possible scenario.

Wouldn't the ************ in the UK postal/customs department just hold the package until the recipient comes to their local office to pay the VAT themselves before they can receive their package? I could swear that I have heard such practice taking place before when the topic of packages being received in the UK from US vendors has come up in other threads here.

Discogs is already adding/collecting US state sales taxes for each relevant state that has such taxes so how much more difficult would it be for them to program the same capability to add in these other countries' VAT taxes? I'm not saying that it would be "easy" but it would make a lot more sense than expecting Joe Schmoe (or even The Leech himself) to be arsed to have to figure this all out and administer such collections on their own.

The problem for an individual seller, I assume, would be in having to figure out how to actually "capture" UK VAT taxes in a sale when the order is first received. Otherwise, I guess you would have to "knock-knock" on the buyer's email (or just through the Discogs communication portal) and tell 'em "Hey Jack, you need to cough up some extra scrilla to cover your countries' ************ VAT taxes." Yeah, that would be just great.

Either I'll figure this out or I'll just say "**** **" and grey out Old Blighty until Discogs works it out.

 

Not if it's marked as a gift. So the seller in East Of Nowhere, NA, can probably get away with the "gift" solution as long as they don't include an invoice in the package (in case it's opened, which they probably will do).

Larger sellers not so much.

I do wonder if there will soon be a new trade in fake or borrowed VAT numbers though

I did hear about some new EU VAT rules but haven't read the details. If Discogs qualifies as a digital marketplace under the new EU rules, like they did with the US MFP rules, then they'll be legally liable so they'll likely implement something like they did with US sales tax.

I would not surprised if the Discogs decides that the loss of Non UK to UK trade &/or Non EU to EU is a better option than them volunteering to become legally liable to collect and remit the VAT on those transactions. Especially since these new rules are likely going to result in lower demand from UK and EU buyers for items not located in their respective jurisdictions. The UK (not sure about the EU) also has duty on records along with VAT, which makes the extra costs to UK buyers even worse.

I'm actually not even sure how it would work even if Discogs did want to register as an OMP. They don't qualify as an OMP, there doesn't seem to be any provision whereby a current non OMP can elect themselves to be an OMP, they don't transact and sell these records themselves so it's not their trade to tax...maybe there is a voluntary OMP opt in like they have with regular VAT rules in the UK i.e. even if a UK seller don't meet the threshold for registration they can still register? They are currently register for VAT in the UK but that's specific to their own trade (commission revenue) and not someone else's.

It's still early days so we'll need to see how this plays out in the long run. But right now, Discogs position appears to be "we're working on a solution so you (the seller) can add VAT and comply if you wish."

 

Asking people to go to their local customs office to pick up a package isn't going to work. It's not like these places are easily accessible or plentiful. They'd have to get people to go to the post office instead. That's sort of the way they did it before anyway. Customs intercepted the package, assessed it, added charges, Royal Mail delivered it and took payment.

You have to consider these rules in the larger context. Sure it messes up small sellers, but these new rules will capture a lot of VAT because big online market places like eBay, Amazon, etc will automatically do all the charging and collecting. They'll capture a huge portion of the online market with the major sellers.

The big difference between the MFP US rules and the OMP UK rules is that the MFP rules make Discogs legally liable to collect and remit the tax on these sales. The UK rules do not make Discogs legally liable to collect and remit VAT. Hence, their reluctance to voluntarily become legally liable.

But it would not be difficult for them to include an option to help sellers deal with this like adding the option to charge it, while still leaving the legal liability with the sellers.

That's what a lot of sellers are saying. Some are just marking these as gifts but most don't want to deal with the hassle.

 

"Santa Claus is coming to town..."

 

That's what changed on 1/1/21 - the UK is no longer collecting VAT on arrival.

eBay and Amazon manage to collect import taxes on items they don't sell themselves.

Or don't feel comfortable lying on government forms they sign their name to.

 

Yes they do. The point I was making was that, unlike say eBay, Discogs does not qualify as an OMP and therefore is not legally liable to collect the tax. I pretty much explained it above.

I have to deal with all this, I'll call them consumption tax, stuff for work. I used to do it in the UK as well but it's been awhile. If I was still there I'd have to know it inside out, but now it's just a hobby. : )

Anyway, things will play out and settle over the long term. One thing for sure, the VAT issue for UK buyers will not go away so regardless of the process, they'll still be impacted. The UK also charges duty on records. Brutal really.

 

I'm not really buying that they could not be seen as an OMP, if they wanted to be. They've been pushing "Discogs Payments" on sellers and buyers for years. All they would have to do is say all UK (and soon EU) sales have to go through the currently existing Discogs Payments, and tax will be collected and remitted by Discogs on those sales. I do understand this will mean work and expense for them. That's why they get paid.

 

Discogs previously said they were in discussions with external advisors to see if they qualified as an OMP. Last week they posted an update explaining why they do not qualify as an OMP and why they aren't going to be collecting the tax on behalf of sellers: United Kingdom VAT Regulations

They wouldn't even need to do that! They already have a process that works for US sales tax and they could use the same for UK VAT if they had to; add the VAT, seller receives 100% of the money, Discogs bills the seller for their fee plus any VAT due to the UK, Discogs remits the money to the UK.