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Dropshipping from EU suppliers into the UK


I am a non VAT registered sole trader that runs an e-commerce business in the UK. Some of our suppliers are based in the EU. Due to the recent events and changes regarding the VAT I have now become very confused and need some help getting my head around the new requirements.

Our business model goes like this:

  • Customer in the UK places in order on our UK based online store.
  • We place an order with an EU supplier
  • The EU supplier ships directly to the customer in the UK.

Do we have to pay the VAT when placing orders with EU suppliers, if so is VAT reclaimable? I have noticed some VAT-registered EU suppliers charge VAT on our purchases (Germany) but some don’t (France, Sweden). What option do I choose in the VAT settings for such suppliers?

Do I have to register for VAT now at all?

Thank you, dear sirs, and madams.

You need to take proper professional advice - this is an insanely complex area where the penalties (or simply the extra costs you will incur) for getting it wrong can be significant. Aside from the VAT there’s going to be issues around getting the customs declarations right, duty that may be payable on shipments over £135 (for which you’ll either need your own deferment account or to pay someone else a fee to use theirs). You don’t want to end up in a situation where your customer thinks they’re buying from a UK supplier but the courier won’t hand over their parcel until they (not you) pay the unexpected customs/VAT/handling charges up front.

Thank you for your reply. Carriers like UPS, DHL take care of all the hassle, but you’re right they will hold parcels until duties are paid.
I am afraid this is now the reality of the so-called “freedom” and removal of the EU’s “red tape” that buyers need to be aware of.

Just one example in the press:

Brexit: ‘I was asked to pay an extra £82 for my £200 coat’ - BBC News

Professional advice is a good idea, the trouble is no one knows for sure.

Think you may find “professionals” will have a good idea of how it does work. After all it’s their job.

Hi Paul,

Does your firm offer consulting services? Can you help? Currently, the business is limping on its legs so I cannot afford a monthly subscription payment for accounting services. However, would gladly pay for consulting to be compliant when running the dying business. Obviously I use QuickFile to do all bookkeeping.

Unfortunately it’s the wrong time of year for me to offer such services, snowed under with last minute SA clients, but there are a few others on here who may be in a better position to help, and you could also try the accountants directory that quickfile has.

Hi @goodbye925

Further to @Paul_Courtier’s post, you can find the QuickFile accountants directory, here: https://accountants.quickfile.co.uk

Thank the Brexiteers, but actually with Quickfile VAT this is no real trouble - just extra hassle. Yes VAT now needs to be paid on bringing the goods in but that’s just cash flow. We’ve found that it’s well worth registering for VAT anyway for the VAT spent you get back from day to day business. You log the import VAT with the purchase on Quickfile. If you’re below the VAT threshold carry on invoicing as now, net of VAT. Quickfile nets it off when it generates the VAT return. The VAT people pay us back VERY quickly if we have paid out more than we collected. Similarly if we have a surplus, we pay them 30 days after the end of each quarter.

Sorry - if you register for VAT you have to charge VAT - I want clear.

Perhaps you should ask an accountant who can go through exactly what your business is and whether you should be charging vat.

This may be helpful for some poor business owners who found themselves in a similar situation. I have consulted with an e-commerce specialised accountant. Currently, I don’t need to register for VAT as our turnover is less than £85K and we sell EU items that cost more than £135, so collection at the POS is not applied to us.

However, it doesn’t hide the fact that the business (and hundreds of others around the country) has been completely screwed over by the decision of the gullible public who believed the lies of the super-rich. Surely the recent government’s official advice to lay off staff in the UK and create subsidiaries in the EU to keep struggling business afloat should raise some red flags in peoples minds. Maybe something went wrong here, right?

To quote Ricky Gervais "The rich will still be rich, the poor will still be poor, and we’ll still blame foreigners.”, although you won’t be able to do it now either.

Thank you Paul,

I reached out to an e-commerce accountant who had provided some guidance and help.
Have a great day sir.

Yup, you only have to look at the British “enthusiasts” like Dyson and Ineos who promised that Brexit would benefit us all - and promptly moved their next major investments to Singapore and France / Germany. Don’t get me started!

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