On January 1, 2021, the United Kingdom officially left the European Union. And even though some effects of Brexit had already been anticipated, many questions had been and are still unclear. In this article, we are going to cover how you as an Amazon seller are affected by Brexit and how you can mitigate some of its negative effects.
Financial Implications of Brexit
Let us start with some good news: you do not need a separate account for selling goods in the UK and the EU. You can continue using your existing account without any problems. But there are many other smaller and bigger changes to selling online.
Some of the main impacts of Brexit on Amazon sellers are financial. These impacts concern not only taxes but also shipping costs as well as import and export processes. We’ll take a closer look at VAT (value-added tax) and customs before talking about other consequences for Amazon sellers in the area of competition and logistics later on.
VAT after Brexit – have you registered your business yet?
If you have not registered for the VAT already, this should become your top priority now. No matter if you are selling goods from the UK to the EU or vice versa, you need to be registered and receive a VAT number. This also applies if you store goods in the United Kingdom and sell those to customers in the European Union even if you are not based in the UK.
VAT is collected on imported goods and exported goods as well as on goods that are sold within the UK. If you sell to customers outside the UK, VAT can also be applicable and you may need to collect it from your customers.
The New VAT Customs Thresholds after Brexit
Since the UK now counts as a third country market for the EU, it is free to impose its own tariffs and rules regarding VAT and customs. The new thresholds have been implemented by the UK on January 1, 2021, but will only be applied by the EU starting July 1, 2021. Let us take a closer look at the new thresholds.
First, sales VAT is collected by Amazon regardless of an item’s value when it is stored and sold in the UK by a seller outside of the UK.
The second category encompasses items with a value of up to £15. VAT is collected at the point of sale which allows these items to pass through customs quickly. Goods with a value between £15 and £135 also have the VAT collected at the point of sale by the online marketplace they are being sold on.
The last category covers goods with a value of more than £135. In this case, import VAT is being collected at customs along with any other fees.
With all the new regulations on VAT, it can be a bit overwhelming. Fortunately, you are not on your own. We are familiar with all the pitfalls and details of VAT collection and are happy to recommend hellotax to help you with registration as well as VAT automation.
Customs – Everything You Need to Know about the New Processes
Now we will focus on the second big change. The introduction of customs has multiple consequences for you as an Amazon seller. Not only do the new processes delay delivery, but they are also reflected in higher shipping costs and additional fees, and handling charges.
This means that if you import goods to the UK to sell them there, you may have to pay import VAT as well as other fees, as mentioned above. But it also means that your customers outside of the UK might have to pay customs and handling charges by the shipping company or pick up their purchases at the customs office.
How to Properly Handle Custom Declarations
Unfortunately, you cannot avoid these additional costs, but you can do your best to ensure that the item can be effortlessly processed at customs and your customer will not be burdened with additional bureaucratic work. By making yourself familiar with the standards for declaring the contents of delivery as well as their value, the customs office can easily judge if the item is beyond a certain value threshold and calculate the correct fees.
Thus, not declaring items correctly can lead to customers being overcharged due to the value being estimated instead of based on what they actually paid for it. If you declare purchased goods as gifts, this may look very suspicious and cause similar problems to the recipient.
Transparency Is Key – Update Your Terms & Conditions
Right now is also a perfect opportunity to check if your Terms & Conditions on Amazon need to be updated. Additionally, your Terms & Conditions can be used to make customers aware of the circumstances. By pointing out the possibility of customs fees, your customers can prepare for that situation and will not be surprised by additional charges that were not visible on Amazon.
Competition & Logistics – It’s a New Playing Field!
All these changes also have implications for logistics and your competitive position. Concerning logistics, not only are shipping costs and delivery times to EU customers affected, but you might also want to reconsider your storage strategy to adapt to the new situation.
FBA Storage Limits – Two Separate Inventories
Previously, Amazon sellers had one storage limit that covered both the UK and EU inventory. From 2021 on, there will be two separate inventories with a storage limit each. This also means that it can make sense to divide your current inventory if you have stored your goods exclusively in the EU or UK up until now. To avoid customs, longer delivery times, or other complications, having separate storage in the UK for UK customers and one in the EU for EU customers is the best option.
Brexit’s Effect on Competition – Domestic & Abroad
The effects of Brexit and the ensuing changes on the competitive situation in your markets are two-fold. On the one hand, domestic sellers in the UK gain a competitive advantage over sellers outside of the UK because they can ship faster and cheaper and do not have to deal with customs for sales within the UK. On the other hand, selling internationally to customers in the EU is being made harder.
This means that some products will be less competitive when they can be delivered and sold cheaper by EU sellers. One strategy to mitigate these effects is the re-organization of your storage capacities as mentioned above. However, for some Amazon sellers, it might not be attractive or possible to stay competitive in certain countries.
While the full economic effects of Brexit will only be seen in a few years, staying informed and updated on the new regulations can save you a lot of worries. By making sure that you are properly registered, knowing when to collect VAT, how to store your goods, and how to make declarations for customs, you are well prepared for the new situation.