Brexit Changes – Part 2
Following our earlier Brexit post about the end of tax-free shopping we have detailed below a number of other changes which will occur on 1 January 2021, the date when the Brexit transitional period will have ended, and the UK no longer follows EU VAT rules.
Low Value Consignment Relief Scrapped
The UK tax authority will abolish Low Value Consignment Relief (“LVCR”). Currently, when an overseas seller ships goods valued at £15 or less from outside the European Union (“EU”) to UK shoppers – private individuals, no import VAT applies.
From 1 January 2021, LVCR will be scrapped and overseas sellers will need to charge VAT on such sales. Approximately 8 years ago, the UK tax authority (“HMRC”) scrapped LVCR for goods shipped from the Channel Islands, since they were concerned that UK retailers were abusing the relief and purposely setting up warehouse in the Channel Islands from where goods such as CDs, contact lenses etc. were shipped into the UK import-VAT free. The abolition of the LVCR is really an extension of this and furthermore it is part of an EU wide proposal to scrap LVCR and it will apply across the EU from July 2021.
HMRC is introducing a system where non-UK sellers of goods up to £135 in value will need to charge output VAT like a comparable UK business. Such imports will no longer be subject to import VAT. For goods sold directly by an overseas seller to a customer, this will mean that the overseas seller will be obliged to register and account for VAT to HMRC. The postal authority or freight agents will no longer collect the import VAT from UK customers.
End of Airport Tax Free Sales
Another change from the start of 2021 is that tax-free sales in UK airports of goods such as electronics and clothing for passengers travelling to non-EU countries is being scrapped. This follows concerns by the UK Treasury that the tax-concession is not always passed on to consumers in the airport.
In addition, the UK tax authorities have expressed concern that in some instances these tax-free goods are brought back into the country by UK residents, putting high street retailers who need to charge VAT at a competitive disadvantage.
Duty Free Extended to the EU
Finally, some potentially good news. As might be expected, after the UK leaves the EU, this will allow UK passengers to bring duty-free alcohol and tobacco products into the UK from the EU provided they are for personal use. In addition, the amounts of duty-free products which can be brought into the UK both from EU and non-EU locations will be increased.
This means that passengers coming to Great Britain will be able to bring back, for example, three crates of beer, two case of still wine and one case of sparkling wine without paying UK duties.
The announcement from the UK tax authority was very careful to use the term “Great Britain” and not the UK. We suspect this is because Great Britain includes England, Scotland and Wales but not Northern Ireland. This is because under the Northern Ireland Protocol certain goods will not need to be checked on the border between Northern Ireland (part of the UK) and Ireland (remaining part of the EU).