Since July 1, 2021, the European Union (EU) has introduced new rules on how VAT is accounted for in cross-border trade. The changes mean that businesses selling goods worth € 150 / £ 135 or less to EU customers will need to charge import VAT.

A recent survey of small businesses in the UK showed that due to the new rules 65% of small business owners were delayed taking orders from EU customers. For 56%, the reason for this decision was that they did not fully understand the amended rules. 22% more were concerned about the financial implications for their business.

Respondents to the survey included small businesses from across the UK selling products such as housewares, clothing, gifts, cosmetics and jewelry. A third of those surveyed said that they regularly received orders from EU customers.

The main area of ​​confusion for small business owners is how to calculate, collect and pay VAT due on sales. The EU’s new ‘Import One Stop Shop’ (IOSS) system is designed to make VAT accounting easier, but the rules also state that UK businesses must use an intermediary to subscribe to an IOSS number. Businesses using an online marketplace, such as Amazon or Etsy, can use the marketplace’s IOSS number. Alternatively, businesses with their own websites can integrate with online systems to calculate and pay VAT due.

The new VAT rules have only added to other Brexit-induced changes to trade between Britain and the EU, for example on packaging, stamping and cosmetics regulations, creating collectively major obstacles for local businesses trying to do business with customers in the EU.

Online housewares retailer Ross Martin, owner of Unfound Home, commented on the new rules, saying: “As a UK-based online business, we strive to diversify our revenue opportunities. Due to Brexit and the new regulations we are facing, if we want to sell to EU countries, we now need to be EORI registered and comply with import and export rights regulations as a company. These are additional constraints for small businesses. We are in a twenty-two wrestling scenario if we don’t take the risk, we can’t reap the rewards. “