Compliance challenges of the new VAT distance selling regime – Sarah Shears
Sarah Shears, Director and Head of VAT at Andersen in the UK, comments on VAT changes to sales from EU customers and how businesses have been adapting to this, in AAT Comment.
Sarah’s comments were published in AAT Comment, 16 August 2021, and can be found here.
When asked what impact VAT changes to EU sales might have had on businesses so far and what challenges this has created, Sarah commented:
“We have seen many businesses reaching out for specialist advice in this area and various different approaches taken. A number of businesses are selling through marketplaces which already have the necessary technology set up in order to calculate VAT in every single EU country.
Some businesses have set up EU companies in territories where they carry out significant volumes of sales in order to simplify the process. Other businesses have invested in EU-based warehouses.
Challenges have been created by having to have registrations for both One Stop Shop and Import One Stop Shop depending on the circumstances and identifying which sales should go on which return.
Some platforms are also selling to the UK and having to deal with the UK ecommerce rules at the same time eg, where the underlying supplier is outside the UK. In some cases, goods could be sold in one transaction that come from multiple underlying suppliers.
Businesses are also having to adapt to different VAT treatments depending on the value of the sale (eg, under or over 150 EUR in the EU and under or over £135 in the UK).
Where these businesses sell to EU, UK and Rest of World, there are numerous complexities and multiple rules and it is vital to map out the various scenarios and ensure the correct VAT treatment is applied.”
Sarah was also asked how clients have adapted so far:
“Clients are investing in specialist advice and using the Government’s SME Brexit Support Fund to assist where they can.
They are also relying more heavily on the use of marketplaces and using subscription-based software that allows businesses to set up an online shop to sell their products. This type of software will automatically charge the VAT rate of the buyer’s shipping country for sales within the EU, where applicable.”
Sarah was also asked how she had been supporting clients with these changes and what advice she had been giving, to which she responded:
“We have assisted clients with undertaking supply chain analyses and ensuring everything is set up correctly.
We have also assisted clients with setting up new entities and new VAT registrations where required, together with helping them to set up their EU structures and advising on the relevant VAT and tax implications.
We are also aware of some specialist companies who will take title and sell to the customer during the check out process, therefore handling all the VAT and duties functions on clients’ behalf.”