Brexit: New VAT rules see EU cycling brands stop online sales to UK shoppers

The end of the Brexit transition period is already impacting the cycling industry – and while the dust is likely to be settling on the UK’s new relationship with the EU for some time to come, and what the implications of that might be, we’re beginning to get an idea of a few of the emerging issues.

We suspect that it will take several weeks at least for the situation to become fully clear for a number of reasons, not least the ongoing disruption caused by the coronavirus pandemic.

Another issue is that with the deal between the UK and the EU only signed off on Christmas Day, and last Monday effectively being the first full working day back on both sides of the Channel, many businesses simply will not have had time or resources to wade through the documentation and assess the implications of the new relationship.

One change that has hit the headlines is the UK’s new rules on value added tax (VAT) and its impact on brands and retailers in the EU selling to customers in the UK – with some having suspended, whether temporarily or permanently, sales to consumers here.

As we reported last weekend, online retailer Dutch Bike Bits – owned by David Hembrow, the long-time cycling campaigner who moved from the UK to the Netherlands in 2007 – says it can no longer accept orders from UK customers due to a change in VAT rules. The story has subsequently been picked up by the mainstream media, including the BBC.

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We’ve also seen Brooks England, which makes its saddles in the West Midlands, suspend orders via its website to shoppers in the UK, because goods are dispatched from its parent company’s facility in Italy. Its products are still available here via bike shops, and while the company hasn’t said that the VAT changes are specifically to blame, we suspect they are part of the equation.

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Campagnolo too has said that “all sales with delivery to the UK are suspended until new updates,” pending “EU dispositions with regard to the Brexit situation.

HM Revenue & Customs (HMRC) says that with effect from 11pm on 31 December, when the transition period ended, consignments of goods with an aggregate value of £135 or less (excluding shipping costs) will have VAT added at the point of sale, whether in the EU or elsewhere abroad.

That means that brands or online retailers based abroad that sell directly to shoppers in the England, Scotland and Wales (separate rules apply to Northern Ireland) must register with HMRC for VAT and account for the tax on goods sold here below that threshold, including paying an annual fee to do so – something that Dutch Bike Bits, to return to that example, says makes it impossible to continue selling to people here due to the costs and the administrative burden involved.

The rules are similar, to some extent, to ones drawn up by the EU to modernise VAT for cross-border e-commerce that were due to have come into effect on 1 January but which, due to the coronavirus crisis, have been pushed back until 1 July – the big difference, of course, being that the UK is now a third country.

HMRC says that the rules do not apply to goods sold through online marketplaces (OMPs) “where they are involved in facilitating the sale,” with the OMP being “responsible for collecting and accounting for the VAT.”

So, signing up to an OMP such as Amazon, the world’s largest retailer full stop, might appear to remove a lot of the burden for small businesses in the EU looking to sell into the UK – except for one crucial change the online giant made towards the end of last year.

As of 18 December, with the end of the transition period looming, Amazon dropped the UK from its Pan-European programme – meaning that retailers in the EU wanting to sell to customers in Great Britain would have to fork out to ship their goods to the company’s warehouse here, something for which Amazon previously footed the bill.

Other issues we are aware of include increased shipping costs, both as a result of Brexit with carriers specifically increasing their rates from the EU to the UK due to the additional paperwork involved, and due to shortage of containers globally chiefly resulting from the coronavirus pandemic, as well as confusion regarding what are termed ‘rules of origin’, and we will be looking at those separately in the coming days.