Thread by @quixoticgeek

There seems to be a few tweets about the new VAT rules for the UK from 1st of Jan, and how that effects companies outside the UK selling to UK residents. Particularly with regard to foreign businesses having to register for VAT. Buckle up, it's time to talk tax law. 1/n

People have pointed fingers and said the UK is being stupid here, & that it's going to cause small businesses to stop selling to the UK. etc...But do you know what. This is actually an EU thing. Those of you in the EEA, you may wanna put the popcorn down, this effects you too 2/n

Many moons ago the EU decided that it wanted to do something about all those things we're buying from Aliexpress et al. They can't do anything about the cost of shipping. But they can at least claim their slice of the pie, in the form of VAT. 3/n

These new rules were to come in on the 1st of Jan 2021. The key point of them is to remove the €22 threshold for attracting VAT on something arriving in the EU. So that €1 Arduino from, you'll now have to pay €0.21 in BTW/VAT (depending on your country). 4/n

Which is good. Tax, done right, is a good thing, it allows us to have cycle lanes, and fireservices, and feeds the poor and stuff. Proportionate Tax is good. The thing is, who collects that €0.21? well right now it would be Postnl, or DHL, et al. 5/n

So great, postnl collect that €0.21. So what? Well they're gonna charge you €13 for the privilege, so that €1 arduino has now cost you €14.21, with most of it going to the mail company. Not good, not good for the consumer. So what is the solution? 6/n

So the idea is that the seller collects the VAT, passes that on to the EU, and then the package comes straight through when it arrives in the EU, and you're none the wise. Your €1 arduino has cost €1.21. All is good. How does the seller collect the VAT? 7/n

Well if you sell through an Online Market Place (OMP), then the market place does the VAT collection, so Aliexpress, ebay, amazon sellers, you notice no difference. Everything is fine, the EU get their pie, everyone's happy. But what about everyone else? 8/n

If you have your own shop, arduinos 'r' Us, you're your own OMP. You have to do the VAT accounting yourself. Collect it from the buyer, and hand it over to the EU. "But I don't want to register for 27 lots of VAT!" I hear you cry. Don't worry, you don't have to. 9/n

The EU has thought of this, you see the EU is a Union, a Union of European nations. Which means that for many things you can interact with them as a single entity. For this purpose they have setup a "One Stop Shop" (OSS). Through this OSS, you can now do all the VAT admin 10/n

Whilst you still need to work out that you're charging the correct VAT rate for the country the package is going to (21% in NL, 19% in DE etc...), when you tell the EU about it, you can do it through one single point. The OSS. 11/n

It's a small amount of admin work, but they have tried to make it simple, and if you do play by the rules, you get access to a market of >450m people to sell your goods to. Sounds great right? Taxes are paid, goods are delivered everyone is happy. 12/n

Thing is, they have not made it easy to communicate this. I've run multinational businesses for over a decade across multiple EU nations, and it took me days to work my way through all the notes about this. The headlines of what's happening are very off putting. 13/n

What happens if you're small business outside the EU doesn't register with the EU, and collect the VAT? Well when you're €5 package arrives in the EU, the recipient will get charged a whopping admin fee by the postal company. Your €5 product doesn't look so appealing now 14/n

If the choice is to stop all your trade with the EU, or do a small amount of admin, as long as you're trade is above a certain level, it's gonna be cost effective to register, jump through the hoops, and collect the VAT. The financial rewards should be worth it 15/n

If you're doing only a small amount of trade, then you're customers will just have to swallow the €13-17 fees the post companies will charge. Hope that they want your product desperately enough to pay the extra whack. 16/n

Now the EU bureaucrats aren't totally heartless bastards, They realise that Covid has changed everything, and so they have delayed bringing in these rules until 1st July 2021. We have an extra 6 months to prepare. 17/n

That's all about the EU, and lovely and reasonable and all. But at the top of this thread I mentioned the UK rules.

Well the UK is doing the same basic idea. But from 1st of Jan. Cos transition ending. 18/n

Ok, so that's not so bad, seller collects VAT, passes it on, everyone's happy right? Well no. You see the EU is a Union of European nations with >450m people in it. The UK is a damp island of 65m people led by racists. That's a very different value proposition. 19/n

So where as the EU has an OSS where you can do all the admin for 27 countries. The UK has to set up it's own little shack next to it. Only without the economies of scale. You have to register your foreign business with HMRC, and do all the admin overhead. 20/n

Unless you're doing a volume of sales to the UK that is in the ten's of thousands region, that's just not going to be cost effective. Which is why a few businesses have already said they won't be selling to the UK from Jan 1st. 21/n

The UK is simply too small a market to make the admin overheads worthwhile. Esp when there's a market nearly 7 times the size right next door, that have made it simpler. It's a stark and brutal display of why being in a Union is so much better. 22/n

In theory if someone sends a £1 arduino to the UK after Jan 1st, then there will be a 20p VAT collection and £8 admin charge to Royal Mail. Annoying, but if you really want that arduino, you're gonna be willing to pay it. But chances are you're not the desperate. 23/n

So far I've talked purely about goods. What about services. Well you know how I said that it had taken me days to get my head round this. Well guess what, I haven't got to the section on services yet. Expect a sequel when I do. The goods thing is hard enough as it is. 24/n

To conclude, yes the UK Government is making it stupidly expensive for small businesses outside the UK to sell to the UK. But the reality is, these are rules that date from being an EU member, and it's only so much more expensive because of the lack of scale. 25/n

It's just another stark illustration of how small and insignificant the UK has become, moored 30km off the shores of a world scale Economic powerhouse. Why deal with 65m when you have a market of 450m next door.

Usual disclaimer, IANAL etc... Thank you for your time. 26/26

Oh, quick post script. This only applies upto €150. Above that, you also have to worry about duties and tariffs.

For all the info you need on selling to the EU after 1st July 2021, see this link from the EU ec.europa.eu/taxation_custo…

For the UK rules, send a telegram to HMRC.