Jan Garioch CA discusses HMRC’s latest guidance updates for distance sales of goods from Northern Ireland to the EU
Jan Garioch CA discusses HMRC’s latest guidance updates for distance sales of goods from Northern Ireland to the EU.
Background
On 1 July 2021 the EU introduced changes to VAT compliance for online sales to customers in the EU, with a key rationale behind the change being the removal of barriers to cross border, online trade. Since the administrative burden of having to be registered for VAT in multiple Member States when sales exceeded the distance selling threshold had been a barrier to the development of the online marketplace, the EU introduced a single One Stop Shop (OSS) VAT registration. Although there are exceptions, in broad terms this allows businesses to account for B2C intra-EU sales through a single return.
Impact for Northern Ireland
Since Northern Ireland remains subject to EU VAT law under the terms of the Withdrawal Agreement, an OSS Union return must be available for businesses there, just as it is elsewhere in the EU. Under EU law, the OSS registration must be administered in the country where the businesses are established. Consequently, the UK has created the system which Northern Ireland businesses can use, and that is available from 1 October 2021.
HMRC’s latest guidance
HMRC published updates to their guidance on how to report and pay VAT on distance sales of goods from Northern Ireland to the EU on 20 September 2021. The updates explain how to complete and submit the return and provide information on the records which must be kept. Some points to note from this guidance are as follows. There is no obligation to use the OSS scheme, but businesses would have to register in each Member State where they make distance sales of goods. Following the EU’s changes, the distance selling threshold is exceeded where sales exceed €10,000 for total cross border sales throughout the EU. The threshold does not apply on a country-by-country basis as was previously the case. Where businesses register for VAT in order to utilise the OSS scheme, but would not be required to be VAT registered in the UK under the normal rules, that business need not account for VAT on domestic sales until such times as it becomes liable under the normal rules.
HMRC also published Submit your one stop shop return and VAT payment on 20 September 2021. This guidance explains that access to the OSS return is via Government Gateway. Once signed in, the return is accessed through selecting the OSS service. A point of note in this guidance is that missing return and payment deadlines for three consecutive periods will result in a minimum of a two-year exclusion from the OSS scheme, with the consequence that VAT registrations will be required in each Member State where sales are made. To mitigate against repeated missed deadlines, HMRC will produce reminders on the 10th day following the deadline for submission.
