Buying from EU private sellers - 20% VAT from 1 Jan 2021

[Al Krow]

1 minute ago, Steve Browning said:

I did suggest that but the idea was rejected. 

That's a shame Steve.

I can see the commercial rationale for not wanting to push this message as it will make EU <--> UK private sales a whole bunch less attractive and obviously the FS is the lifeblood of the forum from a commercial perspective.

It does seem to me to be a quirk in the system in that there are now effectively two layers of VAT on EU <--> UK private sales which is going to make it much more attractive for second hand sales to occur UK --> UK OR EU --> EU.

[Hellzero]

Just one clarification in all these speculations :

A private seller can not subtract the VAT from the goods he's selling as there's no VAT on second hand stuff. The VAT is collected by the last VAT registered retailer/seller before a private buyer and then payed to the state collecting organisation. Concerning import/export, there's a local VAT applicable on any goods coming from a foreign country being it new (all goods) or second hand (on all goods above the incoming country maximum untaxed price). Why ? Because VAT has not been collected yet by the incoming state...

For those sceptical, I have (amongst others, hélas) an European Diploma in Enterprises Management (91% score for those who wonder) and know very well those regulations, but for now all I'm reading are just speculations as the official 1500 pages Brexit deal has not been signed yet, nor read by anyone here...

[ped]

53 minutes ago, Al Krow said:

That's a shame Steve.

I can see the commercial rationale for not wanting to push this message as it will make EU <--> UK private sales a whole bunch less attractive and obviously the FS is the lifeblood of the forum from a commercial perspective.

It does seem to me to be a quirk in the system in that there are now effectively two layers of VAT on EU <--> UK private sales which is going to make it much more attractive for second hand sales to occur UK --> UK OR EU --> EU.

Nothing to do with that at all - I just do not want to pin any advice which I do not fully understand or endorse, just like I don’t advise people on fees for importing items from non EU countries. 

It’s all up in the air, and will continue to be, for a while yet (Globally). Anyone looking to import at this time is responsible for checking or finding out for themselves. 

[Steve Browning]

51 minutes ago, Hellzero said:

Just one clarification in all these speculations :

A private seller can not subtract the VAT from the goods he's selling as there's no VAT on second hand stuff. The VAT is collected by the last VAT registered retailer/seller before a private buyer and then payed to the state collecting organisation. Concerning import/export, there's a local VAT applicable on any goods coming from a foreign country being it new (all goods) or second hand (on all goods above the incoming country maximum untaxed price). Why ? Because VAT has not been collected yet by the incoming state...

For those sceptical, I have (amongst others, hélas) an European Diploma in Enterprises Management (91% score for those who wonder) and know very well those regulations, but for now all I'm reading are just speculations as the official 1500 pages Brexit deal has not been signed yet, nor read by anyone here...

I've been 37 years a VAT professional. Shall we do willies next?

[woolf]

What about items that have been dispatched by private sellers already (in 2020) that are unlikely to cross the border until the new year? 

[Al Krow]

4 minutes ago, Steve Browning said:

I've been 37 years a VAT professional. 

Seriously guys - that really does give Steve a voice on this topic that we would be very foolish to ignore. 

[Al Krow]

15 minutes ago, woolf said:

What about items that have been dispatched by private sellers already (in 2020) that are unlikely to cross the border until the new year? 

That's a very good question. I'm guessing the correct answer is it should be governed by the VAT "tax point", which should be the earliest of the invoice and payment date, but I have no idea how delivery of items straddling the 1 Jan date will impact. I would hope HMRC would take a lenient / generous approach not least given that they have a ton of systems issues to be sorting!

[Al Krow]

On a less serious note:  mods - why does donkey get caught by the profanity filter but willies entirely escape? 😁

[Steve Browning]

3 minutes ago, Al Krow said:

That's a very good question. I'm guessing the correct answer is it should be governed by the VAT "tax point", which should be the earliest of the invoice and payment date, but I have no idea how delivery of items straddling the 1 Jan date will impact. I would hope HMRC would take a lenient / generous approach not least given that they have a ton of systems issues to be sorting!

I have searched for an answer on this and have found none anywhere. It will be chaos to begin with so I think anyone would be loathe to predict. The tax point is fine when dealing with timing issues (which return to include it on or when the rate changes). We are in uncharted water here and I have no idea. I have an unfortunate hunch but I won't express it here as it's no more than that.

As we are discovering, the agreement is rather more sieve-like than was originally trumpeted.

[taunton-hobbit]

28 minutes ago, Steve Browning said:

 the agreement is rather more sieve-like than was originally trumpeted.

Nothing new there, then..............

😎

[Al Krow]

Worth bearing in mind the £390 duty free allowance for kit that we bring to the UK ourselves for personal use. 

But if you go above the £390 limit my understanding is that you pay duty and VAT on the whole amount not just the excess over £390.

This is not going to solve the issue of used goods that are posted from abroad or for more expensive items we bring back.

Edited December 27, 2020 by Al Krow

[DiMarco]

3 hours ago, Al Krow said:

I've summarised the key take-aways in the OP for ease of reference.

All those GAS inducing basses (and other gear) in the FS from EU based BC'ers are going to be 20% more than their listed prices...

Maybe it would be a good idea to add a mandatory region (pulldown selector) field to the for sale section so that it is clear in every single ad whereabout the item for sale is located. What do you say @ped?

 

[Steve Browning]

As I have said, we need to be careful how liberally we interpret private use. 

If we are gigging or getting any reward for our labours then the law says we are a business and any stuff we bring in could be seen as a business asset. 

This gets a bit tax technical but business doesn't equate to profit. 

[Al Krow]

9 minutes ago, Steve Browning said:

As I have said, we need to be careful how liberally we interpret private use. 

If we are gigging or getting any reward for our labours then the law says we are a business and any stuff we bring in could be seen as a business asset. 

This gets a bit tax technical but business doesn't equate to profit. 

Interested in understanding this point a bit more, Steve, as you've mentioned it a couple of times.

In terms of the tax technical bit is being "in business" different to "trading with the intention of making a profit" (whether or not you actually are making a profit)? 

And when does a hobby become a business?

If we're not registered for VAT in practice are we not effectively treated as a private end user as we can't reclaim the VAT on purchases?

[taunton-hobbit]

This is fairly exhaustive -

https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income

[Steve Browning]

46 minutes ago, Al Krow said:

Interested in understanding this point a bit more, Steve, as you've mentioned it a couple of times.

In terms of the tax technical bit is being "in business" different to "trading with the intention of making a profit" (whether or not you actually are making a profit)? 

And when does a hobby become a business?

If we're not registered for VAT in practice are we not effectively treated as a private end user as we can't reclaim the VAT on purchases?

The 6 questions below are how HMRC determine whether there is a business. They are 6 points that have arisen from earlier tax cases. The first of these may be open to interpretation but, as I sad, profit is not an issue. I was involved in demonstrating to HMRC that a certain drummer with an interest in Arab horses can still be running a business, even though it ran at a spectacular loss. He could easily afford to subsidise it. The clincher here is that last one. It's not the only one but it's hard to argue against it.

1. Is the activity a serious undertaking earnestly pursued?

2. Is the activity an occupation or function, which is actively pursued with reasonable or recognisable continuity?

3. Does the activity have a certain measure of substance in terms of the quarterly or annual value of taxable supplies made (bearing in mind that exempt supplies can also be business)?

4. Is the activity conducted in a regular manner and on sound and recognised business principles?

5. Is the activity predominately concerned with the making of taxable supplies for a consideration?

6. Are the taxable supplies that are being made of a kind which, subject to differences of detail, are commonly made by those who seek to profit from them?

This is probably more than we need to know but my point is that anything we buy could easily be seen to be an asset to be used by such a business. I would imagine that goods we buy will not qualify for any kind of relief or allowance as being 'private'.

This may well be irrelevant but I wouldn't want anyone to believe that there is a way of avoiding the costs relating to import.

The extract from taunton-hobbit seems to put a threshold of £1k income (not profit) on it. VAT law uses only those 6 questions and that is harder to quantify. You can answer yes to all of those without getting to £1k.

[Basinski]

https://www.theguardian.com/politics/2020/dec/28/brexit-customs-duties-to-apply-to-eu-goods-worth-more-than-390

[Newfoundfreedom]

3 minutes ago, Basinski said:

https://www.theguardian.com/politics/2020/dec/28/brexit-customs-duties-to-apply-to-eu-goods-worth-more-than-390

Could be worse. I hope that agreement works the same the other way around. If so, I can buy items from the UK under £390 with no charges. 

[Steve Browning]

That's interesting (and worrying). That is not the Tariff free that was highlighted. 

Thanks for pointing that out. 

[Pseudonym]

On 27/12/2020 at 03:57, Al Krow said:

Seriously guys - that really does give Steve a voice on this topic that we would be very foolish to ignore. 

The Basschat proscription against discussions of issues related to the UK-EU schism might make a modicum of sense for reasons of etiquette, but it is surely reasonable to put in place some basic notification that conditions are changing. Part of Basschat is devoted to commercial activities. Discussion of related changes -- and blanket notification that there will be changes, so caveat emptor -- is not only legitimate but also helpful. It doesn't have to be set in stone.

[Steve Browning]

Hopefully folk have got the message now.

[Al Krow]

59 minutes ago, Steve Browning said:

Hopefully folk have got the message now.

I suspect there will unfortunately be quite a few 'nasty' surprises for folk for a while yet. Not sure that everyone who checks out the FS is necessarily going to spot this thread. Trouble is when it's 20% of a bass that already costs a lot, it won't necessarily be something you can just take on the chin if you weren't expecting / budgeting for it.

Edited December 28, 2020 by Al Krow

[Dad3353]

1 hour ago, Pseudonym said:

... It doesn't have to be set in stone.

I think that there are very few folks here that are not aware that changes are afoot.

I think that there are very few folks here that know what those changes will be.

Speculation is of little value, and often (too often..?) sparks acrimonious conflict. We don't want that.

[LukeFRC]

On 27/12/2020 at 11:49, Steve Browning said:

I've been 37 years a VAT professional. Shall we do willies next?

 

 

sorry I had just seen the guardian article and was looking around to see if there was a discussion about it anywhere... 

my rough estimate reading the article - fully expecting this to be wrong but someone correcting me will be useful for everyone...

- buying a bass from Thomann will go up by the price of duty (3.7%?)  And the postal companies handling fee. Thomann will sell VAT free and then UK VAT gets levied so that part shouldn’t change.

- say I wanted to buy a bass secondhand, off here or Bassics of wherever - that’s not (price of bass plus postage) + 3.7% duty +20% VAT +handling fee 

So a £1000 bass that cost £100 for postage from the EU and insurance will change from costing me £1100  this year to costing £1369 plus handling charge next year? 

 

[LukeFRC]

7 minutes ago, Dad3353 said:

I think that there are very few folks here that are not aware that changes are afoot.

I think that there are very few folks here that know what those changes will be.

Speculation is of little value, and often (too often..?) sparks acrimonious conflict. We don't want that.

For benefit of doubt my previous post is based on the duty on guitars quoted previously in this thread and the information in the quoted Guardian article 

Edited December 28, 2020 by LukeFRC
Clarity