VAT considerations on moving stock into Europe to mitigate a possible ‘no deal’ Brexit

Martin Hamilton

Martin Hamilton – Retail sector specialist

Earlier in the year, Amazon emailed British businesses trading on Amazon in preparation of a no-deal Brexit. Some of the advice Amazon provided was that UK sellers should consider sending stock to its European fulfilment centres or warehouses for distribution across Europe on the basis that a no-deal Brexit “may temporarily prevent cross boarder trading”.

Whilst this may seem a sensible strategy to help avoid any possible complications on the back of a Hard Brexit, ALL retail businesses (not just Amazon retailers), that are considering holding stock in Europe, need to give serious considerations to possible VAT implications of selling goods out of a European country in which they do not have a presence.

What are the possible implications for retail business owners?

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Such an arrangement could result in UK retailers facing significant costs such as VAT registration and compliance in that country, as well as the UK charging a possible, unreclaimable, 20% UK VAT charge for moving goods overseas before obtaining the required VAT registration.

An additional concern is the possible administrative burden of having to apply that country’s VAT rates to sales from that warehouse rather than the UK’s rate of 20%, which could in turn have a negative impact on the UK retailer’s margins. Furthermore, these costs/complications are possibly multiplied if the retailers products are housed in fulfilment centres or warehouses in more than one country.

Therefore, whilst Amazon’s advice does provide a solution to possible barriers of entry into Europe following a no-deal Brexit, UK retailers will need to weigh up the possible VAT risks and compliance costs of trading from European warehouses compared to the costs of dealing with the additional possible border disruptions that may arise.

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