1 July 2021 was the implementation date for the changes coming in under the EU’s scheme for Modernising VAT for Cross-Border E-Commerce. The changes are designed to simplify VAT obligations for businesses making cross-border supplies of goods and services.   
 
The measures being implemented affect supplies of goods and services to EU consumers and these are summarised below. The measures concerning goods affects supplies of goods from stocks held by businesses within Great Britain and stocks held within Northern Ireland differently, as supplies of goods (but not services) fall within the Northern Ireland Protocol.

Low value consignment relief has ceased
The VAT exemption for goods in small consignments with a value of up to €22 has been abolished.  Unless falling within import VAT relief schemes, such as temporary importation relief, VAT will be due at the applicable local rate on all imports into the EU. This means that when you send goods into Europe your customer will be responsible for import VAT, regardless of the value of the consignment. Your terms and conditions should be clear for customers to ensure that they know they will be responsible for paying the VAT before the courier will release the goods to them.
 
If you want to take responsibility for paying the import VAT you will need to register in the destination country. For low value deliveries there is a new measure available where you will only need to register in one country: the IOSS.

The non-mandatory Import One Stop Shop scheme (IOSS) begins.  
​​This is a simplification open to non-EU established businesses supplying goods to non-VAT registered EU consumers with a consignment value of €150 or less. Businesses using the scheme must VAT register in one Member State (MS), using a local intermediary, and submit a local VAT return for that MS and a one stop shop return for all other MSs, declaring and paying over VAT at the applicable local rate. Where the goods are supplied via an online marketplace, the marketplace is responsible for accounting for the local VAT via their own one stop shop registration. Goods on which VAT is accounted for under IOSS benefit from a VAT exemption upon importation, allowing faster customs processing. 

The IOSS scheme is not mandatory, it is a simplification. As mentioned above for sales outside the scheme, there are two options: –

1. For the customer to be the importer of record – in which case the import VAT will be collected from the customer by the parcel courier, or
2. For the supplier to be the importer of record, in which case the supplier will be treated as importing their own goods into the EU before the sale to the EU customer, and as a non-established taxable person making an onward supply of goods in the MS of importation, the supplier will be required to VAT register in that member state. They will be able to recover the import VAT but will then account for VAT at the local rate on the local VAT return.

The Non-Union OSS Scheme
This applies to non-EU established businesses supplying services to EU consumers and has been extended to cover all B2C services where the place of supply is the EU (previously only certain telecoms and electronic services were covered). The rules do not apply to services supplied to businesses.

When you sell a service to a consumer the default rule is that the place of supply (and the liability to VAT) is where the you as the supplier belong, but there are a few types of service where this is reversed to where the customer belongs.  

This simplification allows a Non-Union OSS registration to be used to account for VAT on supplies such as those listed below without the need to VAT register in each member state.

• Accommodation services carried out by non-established taxable persons,
• Admission to cultural, artistic, sporting, scientific, educational, entertainment or similar events, such as fairs and exhibitions,
• Transport services,
• Services of valuation and work on movable tangible property,
• Ancillary transport activities such as loading, unloading, handling or similar activities, 
• Services connected to immovable property,
• Hiring of means of transport,
• Supply of restaurant and catering services for consumption on board ships, aircraft or trains etc.

Other Things to Remember
The above points are changes recently made by the EU, but it is also useful to remember the following:

Sales of Goods outside the UK
When you are selling goods that are physically located in the UK to an overseas customer then UK VAT is chargeable, unless you have the relevant evidence of removal of those goods from the UK. Where you have that evidence then you can charge 0% VAT on the sale - this is an export. The rules on exports apply to EU countries as well as non-EU. The rules also apply regardless of whether the customer is a consumer or a business.

Sales of Services to Businesses
Unless modified by the special rules (as detailed above) when a service is sold to a business then the place where VAT is charged is where the customer belongs. The customer will then account for the VAT in their local VAT return. Remember that this applies in the UK where you buy a service from a non-UK business.  

Comprehensive guidance can be found on the European Commission Website at - 
​https://ec.europa.eu/taxation_customs/business/vat/modernising-vat-cross-border-ecommerce_en

​We are here to help so please contact us should you wish to discuss any of the above

The online service for claiming the fifth SEISS grant will be available from late July 2021 and you must make your claim on or before 30 September 2021. As with previous grants under the scheme, the actual date for claiming will be staggered and if you were eligible for the fourth grant, you will also be eligible for the fifth grant. HMRC should contact you shortly by email, text message, letter or within the online service with the date that you can claim. In order to make a claim you must:

• ​Have traded in the 2019-20 tax year and submitted your 2020 Tax Return on or before 2 March 2021
• Have traded in the 2020-21 tax year
• Intend to keep trading in the the 2021-22 tax year
• Reasonably believe there will be a significant reduction in your trading profits due to the impact of Covid-19 between 1 May 2021 and 30 September 2021 - see HMRC examples 
• Have trading profits of no more than £50,000
• Business profits must make up at least 50% of your total income

The fifth grant is different as the level of your grant will be determined by the reduction in your business turnover. To make your claim, you will need to provide HMRC with two turnover figures:

1. Turnover for a 12-month period starting on any date between 1 April 2020 and 6 April 2020 - please contact us if you need assistance calculating this figure
2. Turnover reported on your 2019-20 Tax Return if 2019-20 was not a normal year for your business, you can use the turnover reported on your 2018-19 Tax Return - again please contact us if you need assistance with finding this figure.

The online service will then compare your turnover figures and then confirm the level of the grant you can claim based on the following:

• If your turnover is down by 30% or more, your grant will be worked out at 80% of 3 months’ average trading profits as calculated in previous claims (capped at £7,500)
• If your turnover is down by less than 30%, your grant will be worked out at 30% of 3 months’ average trading profits as calculated in previous claims (capped at £2,850)

HMRC may ask you to provide evidence showing how your business has been impacted by Covid-19 in the period if you make a claim under the fifth grant.  Therefore it is important for you to keep details of issues encountered by the business in the period 1 May 2021 to 30 September 2021, whether this is difficulty obtaining materials, the inability to work due to periods of self isolation or anything else that impacted the business.

We are here to help so please contact us should you wish to discuss any of the above, or if you need any assistance in calculating the turnover figures required in order to make a claim.