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If there’s one law that attracts more attention than any other in 2021, it’s the ‘law of unintended consequences.

Judging by the huge number of people who’ve been hit by tax bills, customs charges and courier bills for ‘administration’ on items bought from the EU, few of us were prepared for the cost of European shopping after Brexit.

And businesses on both sides of the channel are reeling with the reality of the new rules.

We asked legal expert, Gary Rycroft, partner at law firm Joseph A. Jones & Co, to talk us through what’s going on.

A word of warning though – we’re still waiting on clarity from the Government on a range of things, from ‘double charging’ of VAT to the cost of returning goods.

What are tariffs and customs duties?

A tariff (sometimes also called Customs Duty) is a tax imposed by a national Government on imports or exports of goods.

They are source of revenue but also a form of regulation to protect internal markets.

The UK/EU Post-Brexit is ‘tariff free’, but there are hidden traps that mean in some circumstances, buying goods from the EU and importing them to the UK may attract tariffs.

Before Brexit we had free trade with all of the EU and since Brexit the UK has a ‘tariff free’ deal with the EU. What’s the difference?

Post Brexit UK/EU trade will be tariff free if the goods being imported or exported EU to UK are wholly or partially made or manufactured in the EU or UK.

But it gets more complicated when the ‘rules of origin’ come into play.

What are the ‘rules of origin?’

Rules of origin determine the economic nationality of goods imported or exported – this is basically where they were produced or manufactured.

This may not be where they are shipped from. If the rules of origin dictate goods are not from the UK or EU, tariffs may apply to import or export them across the UK/EU Border.

What is VAT?

Valued Added Tax is a tax on goods and services assessed and paid at different points (production, distribution and sale).

It was introduced in the UK in 1973 when we joined the Common Market (now EU) and replaced Purchase Tax.

Consumers in the UK are used to paying for goods inclusive of VAT at the point of sale.

Haven’t we always paid VAT on goods purchased in the EU?

Yes. Each nation in the EU has its own VAT regime and when the UK as part of the EU consumers would pay local VAT on goods at the point of sale just like in the UK.

What’s changed with VAT since January 1, 2021?

There may now be additional VAT to pay on the import of goods from the EU.

There used to be a £15 VAT exemption which has gone. For goods or consignments of goods valued at less than £135, VAT will continue to be collected at the point of sale.

Over that figure import VAT will be payable on crossing the border, which in practice will be payable on delivery of the goods to a consumer.

This has led to consumers paying more than expected when they placed the order.

What about gifts sent to us in the UK from the EU?

Sadly, even gifts crossing from the EU into UK will be subject to import VAT if valued at more than £39 and also Customs Duty if valued at more than £135 (and not exempt under rules of origin).

What about gifts we send from the UK?

Gifts we send from the UK to the EU will now need a customs declaration, just like gifts being sent further afield.

So if you’ve sent things in the past to countries from the USA to New Zealand, you’ll be familiar with the process.

Who pays if I want to return goods bought online from an EU retailer?

Under the Consumer Rights Act 2015 consumers have the right to return goods bought online within 14 days of delivery, but that right does not cover the cost of postage or a courier.

Such expense will only be covered if offered by the retailer. So if you decide not to accept goods because of additional import VAT or Customs Duty, you may have to pay to send them back.

Of course, if you refuse to accept the goods they’ll be returned anyway – but we don’t know if the business or courier will try to recoup these charges (and from whom).

Is it different in Northern Ireland?

The UK/EU Brexit Deal includes a Northern Ireland (NI) Protocol.

Northern Ireland remains aligned with EU VAT rules on transactions. However, NI is still part of the UK VAT system.

Technically, goods movements from Great Britain (mainland UK) to NI will be imports and exports and so the UK government will treat them as normal UK domestic transactions.

Needless to say, the impact on people in Northern Ireland is significant, with some UK retailers declining to send orders to NI.

Are some businesses adding VAT on already?

Some businesses are adding on VAT at the point of sale as are ‘online marketplaces’.

Amazon and eBay are adding on VAT – but we’d still urge caution while the dust settles given the huge scale of these marketplaces the number of businesses involved.

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