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May 18, 2021
2021-1006

UK issues policy paper on EU e-commerce VAT changes and the impact in Northern Ireland

The United Kingdom (UK) Government has issued a Policy Paper regarding the value-added tax (VAT) e-commerce package rules being introduced by the European Union (EU) from 1 July 2021. The Government states that implementation of the EU’s e-commerce package is in accordance with the UK’s obligations under the Northern Ireland Protocol, following the end of the Brexit transition period.

While the EU changes come into effect from 1 July 2021, the UK has already implemented fundamental changes with effect from 1 January 2021, to the VAT accounting and reporting requirements for online sellers, businesses with a direct-to-consumer channel and online marketplaces – with certain variations in the rules for transactions involving Northern Ireland.

Scope

The paper explains how the new rules will apply to movements of goods from Northern Ireland to the EU and imports of low-value goods into the EU or Northern Ireland. Goods are low value where they are in consignments with an intrinsic value not exceeding £135 (€150).

The e-commerce package also introduces new rules for supplies made through online marketplaces, similar to those already applying in Great Britain (England, Scotland and Wales) and partly in Northern Ireland.1

Intra-EU supplies

The EU e-commerce package applies to both goods and certain electronically supplied services throughout the EU for supplies between Member States. However, as the Northern Ireland Protocol only applies to goods, the UK’s implementation of the EU’s e-commerce package will only apply to supplies of goods in respect of Northern Ireland. This means that supplies of services to or from Northern Ireland do not count towards the distance selling threshold.

Imports

The imports portion of the e-commerce package applies to goods that are imported into Northern Ireland or the EU from outside the EU.

Who is affected?

The changes will affect businesses that:

  • Sell or supply goods from Northern Ireland to non-taxable customers in the EU
  • Make supplies of goods from the EU to non-taxable customers in Northern Ireland
  • Send low-value goods to Northern Ireland (or the EU) from outside the EU and Northern Ireland including from Great Britain
  • Sell goods located in Northern Ireland at the point of sale if the seller is located outside the EU

The e-commerce rules also apply to online marketplaces that facilitate the sale of goods:

  • Located in Northern Ireland (or the EU) sold by non-EU businesses to non-VAT registered customers in the EU and Northern Ireland consumers
  • From Great Britain to consumers in Northern Ireland and the EU

Further information

The Policy Paper provides details regarding:

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For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP (United Kingdom), Indirect Tax, London

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ENDNOTE

  1. More information is available in the UK Guidance, Changes to VAT treatment of overseas goods sold to customers from 1 January 2021.
 

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