Brexit and e-commerce – the possible impact on your business

Vlada Karpovich
Brexit and e-commerce – woman on grey love seat with laptop

2020 was a year filled with unpredictability and extreme circumstances. While COVID-19 is very much an ever-looming presence, a different challenge is once again at the forefront of many entrepreneur’s minds – Brexit. Let’s look at Brexit and e-commerce to examine the possible ramifications for your business.

While it is hard to correctly predict the true Brexit e-commerce impact, now that deals have been settled, we can take an educated look at the facts we do have.

The e-commerce Directive

One of the most significant changes surrounding Brexit and e-commerce is the UK’s removal from the e-commerce Directive. Under the Directive, EEA online service providers could operate in any EEA country, “while only following relevant rules in the country in which they are established”. Almost all e-commerce businesses qualified under the directive.

Now the transition period is over you will need to ensure your e-commerce business is fully compliant with the requirements in each EEA country that you sell in. For many, the changes required will be minimal, but legal advice and/or accounting advice should be considered for all business owners to ensure you are doing all that is required. This is the most wide-spread Brexit and e-commerce change, with all e-commerce stores that conduct business outside of the UK affected.

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Low-Value Consignment Stock Relief

The UK is no longer part of the Low-Value Consignment Stock Relief program, which may be a significant change for some e-commerce entrepreneurs. Under the relief program, goods had a £15 VAT exemption threshold. All imported goods purchased are now subject to VAT.

If you are registered for VAT or are likely to register in 2021, this may affect where you hold your stock, or any drop-shipping arrangements you have in place, you take heed to avoid unexpected costs or lower profit margins.

Brexit and e-commerce - shipping containers

Sales VAT vs Import VAT

Imported goods up to the value of £135 are now subject to sales VAT, not import VAT. You should factor this into your sales price if you are VAT registered. You will still need to complete a simplified customs declaration. Any consignments with a value of more than £135 will be subject to VAT and customs in the historic way.

Next Steps

2021 may not be off to the start many business owners had hoped for, but e-commerce remains well insulated. Brexit should be at the forefront of all e-commerce business owners’ minds. Examine what you need to do carefully and get in touch if you would like assistance accounting for your business under these new requirements.

The best time to act is now.

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Breakout E-commerce accountants and Xero specialists to supercharge your UK online business growth.