VAT & Brexit, the changes for merchants

On December 31, 2020, the United Kingdom definitively left the European Union, making Brexit official. This historic move will have a significant impact on all trading activities between the European Union member countries and the United Kingdom.

This could mean delays in parcel processing, especially in the early stages, before the entire process has been fully established. But the biggest change involves taxation.

The tax issue

The UK's departure from the European Union has resulted in a fiscal regime that applies only to that country. You will have to manage the taxes of each package according to its value.

A package worth more than £135 will be tax-free for the seller, and the buyer will have to pay the tax, together with customs duties in the country where the package is received, i.e. the United Kingdom.

For a package worth less than £135, you will have to apply 20% UK VAT on the entire order and pay it to the UK tax authorities.

To manage this specific regime, you will need an adapted module. You will therefore need to associate UK VAT with the UK in your tax rules. You will find the UK VAT at 20% in the list of taxes available in your PrestaShop package. Otherwise you can simply create it and then associate it with the in your tax rule.

>> Download the recommended PrestaShop module

Sending a package

Since January 1, 2021, trade with the United Kingdom is no longer considered as intra-European trade, but as extra-European trade.

This means that new customs procedures apply to shipments sent after January 1.

When sending goods to the United Kingdom, you will need to include the following:

• four copies of the customs declaration CN23 

• four copies of the commercial invoice for a commercial shipment (sale)

One copy of each document must be placed inside the package, two other copies must be affixed to the package in a transparent pouch, preferably on the same side as the shipping label, and the fourth copy is for you to keep.

These formalities are necessary:

• regardless of the type of packaging, envelope or package, as long as it contains something other than documents (which are exempt from declaration),

• regardless of the nature of the shipment (including if the goods are sent free of charge, for example for a gift or a sample).

Form: Customs declaration CN23

Your transporter can often help you fill out this document, which will be affixed to your package along with your invoice.

You can find this document on the internet

In order to create your CN23, you will be asked, among other things:

• The nature of the shipment: non-commercial (gift or sample), sale, return,

• The contents of the shipment: the nature of the various items, their weight, value, tariff number (or "code SH"), their country of origin,

• Sender and recipient (with the respective phone numbers)

Form CN23 must be completed in English, or in any other language accepted by the receiving country.

HS code

The tariff number or "HS code" that you are asked for in the customs document CN23, is a 6-digit number used by all countries' customs authorities to classify goods. The customs authorities need it to calculate any customs duties and taxes.

To determine the tariff code of your goods, simply visit the European Customs website and use the code search engine at the top of the page.

Your EORI number

To send your package you must also affix your EORI number provided by the customs services. This is usually attached to the invoice.

So you need to find out if you have this EORI number.

Your British VAT number

For all orders under £135 you will be required to collect UK VAT (value-added tax) and remit it to the UK.

But first, you must have a British VAT number. You will therefore have to complete the steps online on the HM Revenue and Customs (HMRC) website by creating an account and applying for a VAT number for your business or company.

It can take several days to receive your VAT number, so apply for it quickly if you want to export to the UK.

Conclusion

Brexit will have a significant influence on trade between EU member countries and the UK, but it will also create new opportunities, so we advise you to take all the necessary legal steps to obtain your EORI number or British VAT number as soon as possible.