Running an Ecommerce Business During Brexit

Guides| 5 min read
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Since the idea of Brexit was first mentioned, it has now become a commonly used term all over the world. While the UK officially left the EU on the 31st of Jan 2020, there is presently a transition period that ends on the 31st of Dec, 2020, for both the UK and the EU to settle on new rules and agreements that would come into effect from the new year.

Throughout the transition period, the UK has followed EU rules. Once the transition period is over, there will undoubtedly be differences in how things are handled. The new rules are expected to severely impact ecommerce businesses specifically, because the changes primarily involve customs, taxes, and deliveries.

According to a survey by Statista, as many as 87% of UK residents shopped online between September of 2019 and September of 2020. The UK is also considered a main hub for ecommerce and the world’s third-largest online retail market. So in a country where online sales has such value, it’s safe to say that there are some big changes on the way.

Therefore, it’s important for ecommerce business owners who are either located in the UK or sell to customers in the UK to understand the impact that Brexit will have on their businesses, as well as how they can prepare themselves for it. This article will discuss both.

What is Brexit and why is it happening?

Before we dive into the main topic of this article, here’s a quick recap on Brexit. Simply put, Brexit refers to the United Kingdom’s (England, Scotland, Wales, and N. Ireland) exit from the European Union. But why exactly does the UK want to leave the EU.

There are several answers to this question, but the main reasons revolve around the fact that a majority of UK voters felt that their country was not independent and instead had to work with the EU to make major decisions like taxes, trading, business regulations, and even border control and immigration. Therefore by leaving the EU, they hope to retain their decision-making within their borders.


What can ecommerce businesses expect after Brexit?

Although there are many details that may remain unknown until the transition period is over, it could help to learn about some definite changes that you can expect to see as an ecommerce business owner during Brexit:

Strict customs regulations

Before Brexit, the UK enjoyed the benefit of the European Single Market. This gave all the members of the EU the freedom to trade goods, capital, services, and labour with each other, without having to worry about customs ID, duties, taxes, and tariffs. After Brexit, since the UK will no longer be a part of the EU, there is a strong possibility that there will be more customs regulations for shipments both leaving and entering the UK.

Delayed deliveries

COVID-19 played a huge role in slowing down deliveries in 2020, and Brexit might just slow them down further. In addition to the new customs regulations that will apply for all shipments leaving and entering the UK, there’s a possibility that ecommerce supply chains may have some difficulties adjusting to the new rules and arrangements, which could delay deliveries considerably more.

More taxes and tariffs

After Brexit, both the UK and the EU will be allowed to charge taxes and tariffs on their imports. If they are imposed, then either you or your customers may have to pay them, which could impact your international sales. A 2019 survey conducted by Research and Markets on the implications of Brexit for UK and EU ecommerce stated that customers may avoid making international purchases if it means that they will have to pay extra costs after checkout. 

Changes in VAT laws

The current VAT laws have been mentioned a few times during different Brexit discussions, so there’s a chance that we may see some major changes there. But for now, here are the known VAT rules:

For shipments coming in to the UK from outside:

    • If the order is worth less than GBP 135, then the business will have to collect VAT for it.

    • If a business is using an online marketplace and the order is worth less than GBP 135, then the online marketplace will acquire the tax liability.

    • If the order is worth more than GBP 135, then it is liable for customs duties and import VAT, that the business or online marketplace will have to pay, depending on whether the business is using an online marketplace.

    • Businesses will have to file and remit VAT every quarter.

For shipments sent from the UK to the EU between Jan 1, 2021 and June 30, 2021:

    • It is not mandatory to collect VAT for these orders, since the customer will have to pay the customs duties and import VAT. All necessary customs paperwork must be provided along with the shipment.


How can I prepare my ecommerce business for Brexit?

You may already be preparing your business for Brexit, but there are a few aspects that need to be looked at in particular. Here’s a quick list of points that you can use to check your business’s preparations to see if you’ve got everything down:

Review your products

Go through your products and check for the following:

  • Since many countries in the EU exercise their own rules on what can be imported and exported, check whether your products are accepted by the countries you plan to ship to.

  • Some products may require a license to own them, such as certain weapons and items used in the military. If you sell such products, read your government’s guidelines as well as the guidelines of the country that you are selling to, for information on what is required.

  • Make sure to include this data with all your EU deliveries: HS code or commodity code, product description, value of the product, country of origin, seller’s EORI number, seller’s contact information, and buyer’s contact information.

Apply for additional EORI numbers

An EORI number (Economic Operator Registration and Identification) is used to uniquely identify a seller who trades internationally. If you’ve been primarily dealing with imports and exports for the UK, then you probably only have one EORI number, which is for the UK. After the transition period, however, you may need an EORI number for every country that you trade with. If you are trading between the UK and the EU, you may have to apply for an EU EORI number.

Register for VAT

Currently, businesses in the EU are only required to register for VAT in another country if their sales in that country exceed a certain limit. This limit is 100K Euro for Germany, Luxembourg, and the Netherlands, and 35K Euro for all other countries in the EU. But this might change after the transition period ends.

  • For sellers in the UK, you might have to register for VAT in each country that you have business with, at least until July 1, 2021.

  • For sellers outside of the UK who wish to have business in the UK, you might need to register for VAT with HM Revenue and Customs if you sell orders that are worth less than GBP 135.

Clearly communicate with customers

While all of these changes are happening on the business side of Brexit, your customers may not know about them. So when they drop in to place orders and find that products now cost more, or shipping takes more time, or they need to pay extra taxes that they didn’t have to pay earlier, their first instinct might be to leave and try another seller in the hopes of finding a better deal. Before they come to such a conclusion, communicate what you know about the changes with them and explain the side effects of Brexit that they may not know about. Because after all, keeping your customers around is the most important part of weathering the changes that Brexit will bring. 

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