New post Brexit rules relating to VAT charges when selling goods to EU countries has caused many challenges to UK businesses from 01st July 2021. Previously there was a caveat for VAT on products under 22 Euros. However, this no longer applies. This means that EU customers buying products from the UK will now have to pay VAT on all items. If items are sent to any EU country without having an IOSS number on the packaging that confirms VAT has been collected, the consumer will be asked to pay the VAT due and a hefty handling fee by customs.
This was a challenging time for Unique Magazines as we send many items to the EU every day and previously, they were under the 22 Euros threshold, so no VAT to be collected. If we did not act and become IOSS compliant then every item, we sent to our customers in the EU would not arrive to them without incurring extra charges prior to their magazine being released by customs. Magazines have a reduced VAT rate in many countries and the VAT amount due is different by country e.g., France is 2.1% and Netherlands is 9%, – This from an ecommerce business created challenges when processing order payments.
We investigated many options to become IOSS compliant and to collect the VAT which was now due. After extensive research we partnered with Avalara, allowing Unique Magazines to continue supplying our customers in 27 EU member states with a single VAT registration and return and to obtain a IOSS number.
An IOSS number is a registered number to collect VAT within the EU – you cannot collect VAT in the EU without this. We collect the VAT at the point of sale and allocated the correct VAT amount by each individual countries rate and then we send a monthly VAT return to Avalara at the start of every month. Avalara analyse our data and then confirm how much VAT we need to pay to them. They then send the VAT onto each country we have collected.
With each EU member state having a different rate of tax we needed a solution to collect this at the checkout. Our website development partner – The Dev Team built a bespoke VAT system which we can easily adjust by country. This will charge customers in each EU country the correct rate of VAT on their orders.
We also developed a reporting system that pulls back all EU vatable orders for the month. This automated report is what we use to send data to Avalara each month so they can collate and work out our VAT payments due to each EU member state.
When the customer’s order is dispatched our IOSS number is printed on the package both within the digital customs invoice and as a separate logo on the packaging. We had a few returned magazines for the first few months when the new regulations came into force. This was mainly due to several custom departments not fully understanding the new rules and requirements.
Several customers have thanked us for planning in advance to make sure we were compliant and that they have continued to receive their magazines with the least disruption and incurred costs.
Partnering with Avalara incurs an annual fee to process the VAT data we provide and to register an IOSS number, this allows Unique Magazines to operate efficiently and to reduce any disruption to our customers in EU countries.
Many UK businesses have been affected by the VAT change and it will have been quite a challenging time, especially for smaller businesses. Data indicated up to 40% of businesses turned off EU sales and 38% of businesses were not aware of IOSS changes. Many may not have been able to justify the investment required to be made to their backend systems, website updates and to register for a IOSS number versus there actual EU sales.
Knowing what new regulations were coming in allowed Unique Magazines to upgrade our shipping system with the Royal Mail. We created an API link into Royal Mail Pro Shipping which sends a request for every single item we dispatch. It sends the customers address, the item ordered, the value, weight etc – it then comes back with a label and customs document, for each item. This was a smart move and allowed us to be ready prior to digital labels and digital customs documents becoming compulsory. Not only has this allowed us to dispatch quickly to our customers, but it has also improved our efficiency in house which is brilliant.
IOSS and associated updates to our systems required major financial investment but has been a no brainer to make sure we continue to provide a professional and customer friendly experience
If you are a publisher and have encountered problems since July 2021 when the new rules came into force, please email us to discuss how we can dispatch your magazines.
Contact – enquiries@uniquemagazines or call John Porrett on 0191 270 2805