From a UK perspective there is no longer a requirement to differentiate between business and non business customers and the location to which the goods are sent. All goods sold from a UK business to customers outside of the UK are now zero rated exports. The usual forms of evidence are required to support the removal of the goods from the UK and export declarations must be completed.

While not relevant for determining the UK VAT position, the destination of the goods, the terms of delivery and whether you customer is in business or not, becomes relevant in relation to establishing EU compliance requirements.

The terms of delivery of the goods will now drive whether a UK business has a VAT registration obligation in the EU.

Sale of goods to business customers in the EU will generally mean the recipient business is the importer in their country and will deal with the relevant VAT requirements as an importer in that country.

In terms of goods sold to consumers, there are a few scenarios.

In simple terms, goods sold duty paid (DDP) means that the UK supplier is responsible for the payment of the import VAT in the country of destination and will have likely built that into the price of the goods; the consumer will therefore not have any further VAT to pay on receipt of the goods.

The UK supplier will be deemed the importer in the country of destination and accordingly an onward sale of these goods then takes place in that country to the end consumer. A VAT registration obligation therefore arises in that country for the UK business.

Goods sold duty unpaid (DDU) puts the burden of accounting for the VAT on to the end consumer; they are effectively the importer in the country of destination and so under current rules, subject to further comments below, there is no requirement for the UK business to register for VAT in that country.

While relieving the burden of an EU VAT registration for the UK supplier, DDU terms has its disadvantages in terms of marketability to EU customers, especially for e-commerce businesses where the price paid for UK goods at point of sale is then inflated by a VAT charge (plus a courier administration fee) on arrival at their destination. It can make the pricing of goods on websites tricky!

With effect from 1 July 2021, the EU will also be implementing new procedures to deal with the sale of goods to EU consumers where the consignment value is 150 Euros or less. UK businesses will be required to register for the Import One Stop Shop (IOSS) which has been created to facilitate and simplify the declaration and payment of VAT for goods sold from a distance by sellers from either the EU or from a non-EU country or territory.

It will require UK businesses to pick an EU country in which to register for this scheme. All sales under 150 Euros to all EU countries will then be reported through this one IOSS return.

In relation to the period between now and 1 July, and then post July for consignments of over 150 Euros, businesses using DDP terms for sales to EU consumers will need to register for VAT in each EU country they sell to, which will in many cases prove to be a large administrative and costly burden.

Businesses should now review their revenue streams and non UK sales lines to determine how they intend to operate and comply with the relevant EU obligations accordingly.

Please get in touch with Lynn and the team if you’d like to discuss any further queries you may have.