Planned changes to VAT will result in higher costs and less choice for online shoppers, warns ParcelHero

This article is brought to you by Retail Technology Review: Planned changes to VAT will result in higher costs and less choice for online shoppers, warns ParcelHero.

UK shoppers should make the most of international marketplace bargains on Amazon Prime Day on 5 October, says ParcelHero. A new Government policy paper deals a double-whammy to overseas purchases from 1 January: post-Brexit Brits will pay 20% VAT on all international online purchases while overseas sellers will have to register for UK VAT.

This year’s Amazon Prime Day, which is widely expected to be 5 October, will be the last one before new VAT changes hit British shoppers in January, warns the international home delivery expert ParcelHero. It cautions that British online shoppers who purchase items from international sellers will soon see a 20% rise in the price of many items. An HMRC policy paper, released this week, has confirmed that Low Value Consignment Relief will end on all imports into the UK once Britain leaves the European Union (EU) on 1 January 2021.
 
ParcelHero’s Head of Consumer Research, David Jinks MILT, says the paper confirms Value Added Tax (VAT) exemption ends on all VAT eligible imported goods valued at £15 or less next year. Previously, such items had escaped the tax. The change is happening at the exact time many overseas sellers are being forced to register for VAT in the UK, warns David. He says that will drastically reduce the number of online retailers wanting to sell to Brits:
 
‘VAT is currently waived on any item under £15 (or 22 Euro) entering the UK from outside the EU. This saves red tape and annoying extra charges on low-value items. After Brexit, the changes mean that there will be VAT to pay on all applicable EU and overseas sales to the UK, charged at the UK VAT rate (currently 20%).
 
‘What does that mean for UK online shoppers? Put bluntly, it means that an item that now costs £14.99 will cost £17.98 from 1 January because of the extra 20% VAT. We’ll all be paying up to around £3 more on every international purchase.
 
‘The snappily titled HMRC paper, “Changes to VAT treatment of overseas goods sold to customers from 1 January 2021”,  also states that all international sellers will be responsible for charging and collecting the UK VAT on all items under £135. That means overseas sellers will be required to register and account for the VAT to HMRC unless they use an online marketplace. If they do sell through a marketplace, for example Amazon or eBay, the marketplace will be responsible for collecting and accounting for the VAT.
 
‘To compound the problem, Amazon is also insisting that from 1 January,  EU and international sellers such as American or Chinese merchants selling items to both British and EU shoppers will have to split their stock and hold some in Amazon’s UK warehouses. That involves significant new transport costs and red tape for overseas sellers.
 
‘The costs involved in these changes may well reduce the choice and increase the cost of items available to UK buyers in the future. Overseas sellers from the EU, USA and China may decide that the extra charges and bureaucracy involved in selling to UK consumers is not worth the candle.
 
‘Brits have been buying increasing amounts of goods online from EU and international sellers as the coronavirus pandemic continues to make shopping in centres and crowded stores a worrying prospect. We believe British consumers will be facing higher costs and less choice from January, as the impact of Brexit starts to bite.