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The ‘Seismic’ G7 Tax Reforms: Will You Be Affected?
2021 is shaping up to be one of the most important years in a generation when it comes to tax reforms. Not only have we seen worldwide implementation of e-invoicing and the unveiling of the EU VAT Ecommerce Package, last week’s G7 summit saw major reforms to the way Multinational corporations will have to pay tax. The reforms are intended to force these corporations to pay more tax and to crackdown on tax avoidance.
What Does The Reform Entail?
As stated in the introduction, the driving force behind these reforms is to ensure that multinational corporations pay tax to the countries where they do business. It is well know that many big multinationals will set up branches in ‘tax havens’, countries that have a low corporation tax, and then declare their profits in that country. Whilst this is entirely legal, the major economies have found this frustrating since it is in their countries where most of the sale and profits are being made.
In order to do this, the reforms are separated into two ‘pillars’.
Pillar One: Making Corporations Pay Tax Where They Operate
The first pillar of the G7 tax reforms is concerned with making multinational corporations pay taxes to the countries within which they operate. This means these countries will now need to pay tax to the country in which their consumer resides rather than the country that they are situated in.
This will undoubtedly raise more funds for the major economies, however there is a catch. This new rule only applies to companies with a profit margin of at least 10%. These companies would then pay a tax of 20% on any profits over this amount. This would rule out Amazon, for example, who have a profit margin of roughly 6%.
Pillar Two: Having A Worldwide Minimum Corporate Tax Of 15%
The other side of the G7 tax reforms is the implementation of an international minimum rate of 15% corporation tax. This would hopefully stop countries attempting to undercut each other with lower tax rates.
It is speculated that this will mean the end of digital taxes that have been implemented by the UK and some EU countries as America want to make sure that their multinational tech companies are not being targeted.
What Will The G7 Tax Reforms Mean For The Average Seller?
As it stands, not much. Even those on Amazon, are unlikely to see any changes to the service for a while since these reforms are still in their infancy. There is still a long way to go in terms of actually agreeing to more concrete rules of the reforms – as it stands, there is just an agreement in principle in place.
The G7 nations still have the task of convincing other major economies such as China to follow suit. The G7 tax reforms will need to be as widely implemented as possible to have any real affect. However, sellers should definitely keep an eye on developments. Speakers after the agreement have been keen to stress that the proposed 15% is only a minimum, and many will push for a higher rate. The fact that Amazon fall outside of the first pillar may mean that the UK and EU push for a wider scope for pillar one. It is also not clear how countries such as Ireland, who have a current relatively low corporation rate of 12.5%, will react to the news.
Hopefully this information has been helpful to you. Should you need more help, we would like to take this opportunity to remind you that our long history of working with Amazon and eBay sellers means we can offer you expert advice. Please do not hesitate to give us a call on or send an e-mail to enquiries@jpaccountant.com or a call on 07734182821 should you require any assistance.
The New CE-Marked Legislation & How It Affects Amazon Sellers
Importers and Amazon sellers from outside the EU should be aware of the new changes that are coming into force from July regarding CE marked products that are brought into the EU. From July 16th, importers of CE marked products must have an EU representative, namely a ‘Responsible Person’, present in the EU to act as the point of contact when it comes to the product’s compliance. This article will describe what a CE-marked product and a ‘Responsible Person’ is, who is affected by the new legislation and, most importantly, what you need to do if you are an Amazon seller.
What are CE-Marked Products & What Is Changing?
You will no doubt have seen the marking ‘CE’ on various products. The marking signals to anyone assessing the product that it has been deemed to meet EU requirements. These requirements cover environmental, safety and health standards. Products from outside the EU which are then imported to the EU for the purpose of being sold must have this marking.
From July, suppliers of these products will have to have somebody who is stationed in the EU to act as a representative for the products and its compliance to these regulations. This representative will be called a ‘Responsible Person’ and it will be illegal for non-EU sellers to sell their CE-marked products in the EU without one.
What Is A Responsible Person?
So as we have stated, the Responsible Person is the representative in the EU. This person can be an importer, a fulfilment provider, or a manufacturer but they Must be stationed in the EU. If you are in doubt, It is probably worth checking with the relevant tax authority upon appointing a Responsible Person to check they qualify.
This representative will then act as the mediator between the supplier and the EU. They will be required to obtain and monitor all the relevant documentation required to sell CE-marked products in the EU such as the product’s EU Declaration of Conformity. They must also be the person who informs the relevant authorities should the product pose any risk.
Who Is Affected By The New CE-Marked Legislation?
Anyone who imports CE-marked products into the EU to sell will be required to adhere to the new legislation. This includes Amazon sellers. Products typically required to be CE-marked include machinery, toys, electronic devices, protective equipment and construction equipment, among others.
Some products are exempt from the requirements. These products include medical devices, explosives for civil use, and certain lifts and cableway installations. It is imperative you check with your supplier or legal counsel as to whether your products are required to be CE-marked.
How Does This Affect Amazon Sellers?
The good news for Amazon sellers is that Amazon can act as your Responsible Person. Amazon offer a service called ARP (Amazon Responsible Person) which you can subscribe to. This means that your products will be covered by Amazon. You do not necessarily need to use Amazon as your responsible person, but it is highly recommended that you do.
You can find more information on the ARP service here. You will need to be signed into your Amazon account to access the information.
What Is The Cost Of ARP?
The service will cost you €25 per month, or €300 per year. The first charge will be taken in August 2021. The price of the service may vary but you will be notified well in advance of any changes to the service.
The service will be charged from your primary EU marketplace account, and will be deducted as a ‘Miscellaneous Adjustment’ on your account.
There is currently a limited time promotion which means that Amazon will provide the service for free until January 2022, essentially halving your yearly subscription price for the first year.
What Do You Need To Do?
Once you have subscribed to the service, you will be required to submit all the relevant documentation to Amazon. This includes your compliance documentation and technical documentation for your CE-marked product. You will also be required to add Amazon’s contact information to your subsequent FBA inbound shipments from July 2021.
Please note that this service will only apply to the products that you sell through Amazon on their EU website and are fulfilled by them. The service also only applies to the CE-marked products that are covered by the legislation, and not for the products that are exempt which we mentioned earlier (medial products etc.). For products that you sell into the EU that are not sold through Amazon you will have to appoint another representative as Amazon will not be responsible for these products.
You can find more information on what you need to do and what will be covered by Amazon here. As before, you will need to be signed into your Amazon account to access the information.
Conclusion
Hopefully this information has been helpful to you. Should you need more help, we would like to take this opportunity to remind you that our long history of working with Amazon and eBay sellers means we can offer you expert advice.
Please do not hesitate to give us a call on or send an e-mail to enquiries@jpaccountant.com or a call on 07734182821 should you require anymore assistance regarding your CE-marked products.
The Flat Rate Scheme (FRS) & Online Marketplaces
Whilst the changes to the way VAT is collected on sales for sellers on online marketplaces has been met with mostly positive reviews, one area of contention has been how the Flat Rate Scheme fits in to this. We have received many questions such as:
As an overseas online seller, once left the FRS, how could I claim my input VAT?
I am on FRS and have stock on hand since 1st Jan 2020, but online marketplace is liable to account for the VAT at standard rate, am I able to claim back import VAT for those stock on hand?
Hopefully, the following information could provide you some guidance.
The FRS & Online Marketplaces
From the beginning of 2021, the UK VAT regulation for overseas online sellers has been changed. However, for those traders under the Flat Rate Scheme, it might not be beneficial in terms of the input VAT claim restrictions. It is mainly because of the new VAT collection responsibly of Online Marketplaces (OMPs).
Some traders mentioned that HMRC might allow online sellers to claim back VAT on the stock on hand value when the OMP’s started to deduct VAT. However, so far, there is no written guidance regarding this specific VAT treatment.
What We Know So Far
The following information about FRS might help you to understand better the current situation. These are for reference only. Traders are advised to contact HMRC for any specific VAT enquiries.
- Under Flat Rate Scheme, an allowance for input tax is built into the flat rates. You cannot recover input tax or VAT on imports or acquisitions. This is because the flat rates are calculated to represent the net VAT you need to pay to HMRC.
You must leave the Flat Rate scheme if:
- you’re no longer eligible to be in it.
- on the anniversary of joining, your turnover in the last 12 months was more than £230,000 (including VAT) – or you expect it to be in the next 12 months.
- you expect your total income in the next 30 days alone to be more than £230,000 (including VAT)
- If the value of your stock has increased while you have been on the scheme, you may be eligible to recover additional VAT on stock which you have on hand when you leave the scheme. For details of if and how you could make an adjustment, please refer to the VAT notice 733 section 12.9
- For non-UK online sellers, from the 1st Jan 2021, Online Marketplace (OMP) has been treated as deemed supplier, and so liable to account for the VAT on sales facilitated through its marketplace. This means that for VAT purposes the seller, operating through an OMP, will no longer be making a supply to consumers in the UK.
At the point the goods are sold to the customer, the overseas seller will be deemed to make a zero-rated supply of the goods to the OMP.
How Does Import VAT Fit Into This?
Overseas sellers who are registered for VAT, can reclaim any import VAT they had to account for when the goods were first imported into the UK. The normal rules about what VAT can be reclaimed as input tax will apply. Find further information about input tax in VAT Notice 700.
- HMRC has advised that any sales a seller makes through an online marketplace, where the online marketplace is liable to account for the VAT, will not be included in the Flat Rate Scheme calculation from 1 January 2021.
Sellers who decided to remain in the scheme will continue to be subject to its conditions, including the restrictions on recovering VAT.
Should You Leave The FRS?
A seller can decide to leave the scheme at any time.
That means FRS will still be available for any eligible UK VAT registered business. However, it might not make any significant benefits for overseas online traders. In some situation, applying FRS will be worse than the standard VAT rate.
You can still contact J&P to claim your Input VAT via regular VAT returns by leaving the FRS. However, you must provide valid import VAT documents, any UK acquisition VAT invoices, or stock on hand valuation records in case HMRC query the figures. Traders must also comply with UK VAT regulations and make an accurate customs declaration under their own UK VAT registration number.
Our long history of working with ecommerce sellers, means we can offer you expert advice – so please do not hesitate to give us a call on or send an e-mail to enquiries@jpaccountant.com. As well as help with the upcoming EU Ecommerce VAT Package and registering you for the OSS, we would be more than happy to file your EU VAT returns, and help you comply with VAT in case your account faces any issues. Get in touch to receive a quote today.
Brexit 6 Month Review: A Difficult Start
It is hard to believe we are already in June. Not only does this mean we are approaching the halfway point of 2021, it also means we can review how Brexit has gone in its first six months.
Imports & Lack Of Trade
Perhaps the biggest problem that has arose from Brexit has been the decrease in cross border trade. The ONS reported that UK exports to the EU dropped 40% in January and imports also fell dramatically. This resulted in a decrease of £6.6 billion, the largest monthly drop since records began. Furthermore, online deliveries to the UK from the EU were said to have plummeted by 50.7% in the first quarter of 2021.
This has been mainly due to issues with implementing new customs procedures and the increased cost of importing. Confusion around new requirements, such as EORI numbers and C23 forms have seen many shipments be refused or delayed.
On top of this, many items had to be verified and checked by both the EU and the UK, whereas previously one verification would have sufficed. This meant that many perishable deliveries were spoiled due to the extended time they spent at customs.
These issue have lessened as the year has gone on and businesses have gotten more wiser to the new obligations. However, there are still issues with the system, and many companies from both the UK and the EU have opted to cease trading with the other party altogether in order to avoid the new procedures and costs.
New Trade Deals With Other Countries
In order to boost trade, the UK government have signed a number of free trade agreements with countries around the world. Mexico, Canada and Denmark are just a few of the countries that the UK have signed a specific agreement with in order to facilitate cross border trade.
However, one big omission from that list is the USA. Since Biden has took office, the UK and the USA have failed to reach any sort of meaningful trade agreement. How the landscape of trade between these two economic giants looks in the coming months could have a massive impact on how successful Brexit is viewed in years to come.
Another country that the UK still haven’t sorted out the problems with is Northern Ireland.
The Dilemma Of Northern Ireland Since Brexit
A lot was made in the build up to the deadline for a Brexit deal about where Northern Ireland would fit into everything. As it turned out, these fears were not unfounded as we witnessed major delays which caused empty supermarket shelves and millions lost in delivery fees.
Northern Ireland has been granted dual status as being simultaneously part of the UK and part of the EU bloc. This has caused problems for a number of reasons.
First of all, the VAT rules surrounding Northern Ireland have been extremely complicated. The way in which an importer must conduct themselves changes depending on whether the goods being delivered to Ireland have gone through the UK or the EU first. On top of this, importers need to have a different EORI number for trading with Northern Ireland. This is a big issue one has to consider when reviewing Brexit.
All the above issues aren’t even taking into consideration the issues with the Northern Ireland protocol, a topic that the UK and EU are still debating to this day and has resulted in the EU beginning legal action against the UK. Undoubtedly Northern Ireland have been one of the biggest victims of Brexit so far. It is still not clear how the UK and the EU will resolve this issue. How they do has an extra layer of importance as it very may well set the precedent for how disputes between the two parties are settled in the future.
Ecommerce
As the figures in this article relating to online deliveries have already shown, cross-border ecommerce has definitely struggled to adapt to the new post-Brexit regulations. On top of this, higher costs and the difficulties that many consumers have found with returning items have meant that they are more reluctant to buy from abroad.
One of the major areas of ecommerce that has struggled is drop shipping. The increased costs of importing have meant that the business model has really been put under major stress. The ending of low consignment relief has also added to this burden. You can find out more about this in our previous article on drop shipping.
Pretty Poor Start For Brexit – But There Is Hope
When you review Brexit, it has clearly not gone completely smoothly for merchants and businesses. However, sellers should not be too dismayed. It was never going to be an easy start to post-Brexit life, and the pandemic has certainly not helped. As the lockdowns end, companies grow more accustomed to the new procedures and the EU Ecommerce VAT Package brings the EU ecommerce rules more inline with the UK’s, we should see a more positive outlook by the end of the year.
If you are a business who participates in cross border e-commerce, or importing of any kind, we would be more than happy to help you register for an EU and UK EORI number. We can also help you register for UK VAT, the UK VAT deferral scheme, file your UK and EU VAT returns, and help you comply with VAT in case your account faces any issues.
At J&P, helping your business is our passion, and we understand that companies across the UK are at risk now more than ever. We are here to support you through this post-Brexit period, so please do not hesitate to give us a call on or send an e-mail to enquiries@jpaccountant.com.
Drop Shipping Not Delivering Profits Since Brexit
Ecommerce sellers were well-aware from the outset that Brexit would likely have a major impact on their business. What was perhaps less obvious was that Brexit would affect drop shipping so drastically. Drop shipping is a business model for ecommerce sellers that means they don’t need to hold stock or inventories. This segment of the industry has been in real trouble since Brexit with many ecommerce sellers abandoning the model altogether. This article will take a look what drop shipping is and how Brexit has affected it.
What Is Drop Shipping?
As stated in the introduction, drop shipping is a business strategy employed by many ecommerce sellers which means that they don’t need to hold stock. Rather than having a huge inventory, these sellers wait until an order is placed, and then buy the product from a third party in another country, who then sells the product directly to the consumer.
This is a very popular form of ecommerce and is very common on platforms such as Etsy and Shopify. Indeed, there are over 140,000 drop shippers in the UK alone.
How Has Brexit Affected Drop Shipping?
The main ways that Brexit can be seen to have impacted drop shipping is new VAT regulations and customs.
New VAT Requirements
The first major change that Brexit brought about was shifting the responsibility for VAT away from the customer at the point of receipt and on to the company or facilitating market place at the point of sale.
This meant that prices went up to account for the VAT. This is extremely problematic for dropshippers since they are obviously already working with narrow profit margins since they are reselling from a third party.
Brexit also saw the ending of low consignment relief, meaning products and imports under £15 were also subject to VAT which was not the case previously. This again meant that cheaper products had to be re-priced.
Customs & Importing
The other main issue was the massive changes to importing and customs. Customs now places much more obligations on importers, such as EORI numbers and C23 forms. This has meant that many suppliers no longer think it is worth it to deliver such small items.
Even if a drop shipper’s supplier is still willing to ship products to the UK, it is the supplier who is responsible for customs declarations. This means that a drop shipper can not be 100% sure that their products will even make it through customs.
What Drop Shippers Should Do
The first thing is to register for VAT. Previously this would not have been required but now if anyone is to sell directly to a UK consumer (not through a market place) they must register for VAT. We can help you register for VAT.
The next thing is obviously to check whether the increased VAT will mean you need to adjust the prices of your products or drop them from your offerings altogether. If you are using OMPs such as Shopify, it would definitely be worth changing your tax settings.
Some experts believe it would be worth drop shippers getting a lot of stock delivered in bulk. But, whilst this may save you some money, it would defeat the whole point of drop shipping.
Is The Model Still Viable?
Brexit has certainly had a negative affect on drop shipping. Sellers should certainly take a long look at their business model and decide what the best course of action is to take. Our next article will be a full review of Brexit 6 months on, so make sure you follow us on our social media so you don’t miss it.
If you are a business who participates in cross border e-commerce, or importing of any kind, we would be more than happy to help you register for an EU and UK EORI number. We can also help you register for UK VAT, the UK VAT deferral scheme, file your UK and EU VAT returns, and help you comply with VAT in case your account faces any issues.
At J&P, helping your business is our passion, and we understand that companies across the UK are at risk now more than ever. We are here to support you through this post-Brexit period, so please do not hesitate to give us a call on 07734 182821 or send an e-mail to enquiries@jpaccountant.com.
One-Stop-Shop Guide For Online Marketplace Sellers
For the most part, ecommerce sellers will be happy to know that the launch of the one-stop-shop (OSS) is just around the corner. The new simplification mechanism will mean that many ecommerce sellers no longer have to register for VAT in every state that they sell to, and instead can register in one state and submit one quarterly return for all of their pen-EU sales. However, this doesn’t necessarily extend to Amazon sellers. This article will look at the relationship between online marketplaces such as Amazon and the one-stop-shop, and what changes sellers can expect to face. If you are interested in learning more about the One-Stop-Shop you can find more information in our recent article. This article will be tailored specifically for Amazon and other online marketplace (OMP) sellers.
New Rules For Online Marketplaces From The Introduction Of The EU VAT Ecommerce Reforms
The EU VAT Ecommerce package is the collection of sweeping reforms that take effect from the beginning of July. The One-Stop-Shop is a part of these reforms.
These reforms are having a big impact on how the VAT from sales made using OMPs are collected. From the June 1st, it will no longer be the responsibility of the sellers to account for VAT on their sales. Instead, the online marketplace will be responsible to collect the VAT on all B2C sales that are below €150.
In other words, rather than being liable for import VAT, the VAT for these sales will be collected by the marketplace (such as Amazon) at the point of sale. This is definitely a win for ecommerce sellers, as it will mean less reporting responsibility for them. There is less good news when it comes to the OSS…
Can Amazon Sellers Or Online Marketplace Sellers Use The OSS?
This question is quite complex, as it depends on how involved Amazon are in your processes. If you merely use Amazon as a platform to showcase your products, then you can benefit from the OSS. This also goes for any sales an Amazon seller makes through their own website or online store.
However, Amazon sellers and those who use an online marketplace to facilitate their trades through fulfilment cannot use the OSS for their sales. This is because these sales fall under a specific category, which essentially means they are considered to be a B2B transaction. In this sense, nothing changes.
You must also be aware that you must remain VAT registered in every country where you hold stock. This includes if your stock is in an FBA warehouse. Please be careful when trying to de-register from countries.
What Should Sellers Do?
If you use FBA then you don’t need to do anything. You can carry on operating as you are and Amazon will automatically begin collecting your VAT. Just be aware that is only for sales under €150 though. If the sale exceeds this amount the VAT is your responsibility.
If you are not part of the program then you should register for the OSS. You can find out how to do so here. It is also worth signing up for the One-Stop-Shop if you make sales from another source such as your own website.
Should you need more help, we would like to take this opportunity to remind you that our long history of working with Amazon and eBay sellers means we can offer you expert advice.
As well as helping with your Fulfilment, we would be more than happy to help you register for the OSS and help you with all your VAT compliance needs in case your account faces any issues.
So please do not hesitate to give us a call on 07734182821 or send an e-mail to enquiries@jpaccountant.com for a quote today.
