Brexit – What’s new
After a long period of changes, negotiations and changes, the “infamous” Brexit will reach a major milestone. From the 1st of January 2021, the United Kingdom and connected countries and regions, such as the Isle of Man and Northern Ireland, will no longer be part of the EU. During the transition period, we kept in contact with several authorities, to ensure that we can remain compliant with the regulations that apply to the sale of our product and services to UK residents. Unfortunately, it was only in the last few weeks that we were given some clearer instructions on how we will have to proceed. Due to the new rules, we will have to make some changes to our sale policies. For convenience and brevity, we prepared a summary, which you can find below.
Changes from the 1st of January, 2021
From a customer’s, things will remain mostly the same, with a notable exception. The UK Revenue Office informed us that, since we deal exclusively in services, we will have to account for VAT on all our sales, regardless of the amount. Like it happens with intra-EU sales, we will have to make a distinction between sales to consumers and sales to businesses:
- Sales made to UK businesses, i.e. customers with a valid UK VAT number won’t have VAT applied to them. The buyer will account for VAT like they did, with the reverse charge mechanism.
- Sales made to UK consumers, i.e. customers without a valid UK VAT number, will be subject to the applicable VAT, like it happens now. Note: UK businesses who are not registered for VAT will be treated as consumers, in this scenario.
What described above is exactly what happened in the past, for intra-EU sales. An important difference is that, to charge VAT to UK consumers, we will need a UK VAT number. We already applied to get such number from the UK Revenue Office, but we haven’t received one yet.
How the changes might affect our customers
Unfortunately, without the UK VAT number, we can’t charge VAT to UK consumers. Still, the UK Revenue would ask us to pay them the applicable VAT, which we can’t collect. They suggested us to just increase prices, to “cover” for the VAT, but that is not feasible, as it could affect all other clients as well.
Due to this “wrinkle”, we had to take a difficult decision. Starting from the 1st of January 2021, we will no longer be able to sell our products to UK consumers. If you try to place an order with a UK billing address, you will be required to enter a valid VAT number to complete the purchase.
This restriction will be in place until we will receive the necessary documentation from the UK Revenue Office, which will allow us to resume charging VAT to UK consumers. As of today, we don’t know how long that is going to take. The officer informed us that this registration process can take several weeks, and there isn’t much we can do to speed up the process.
Update – May 2021
Due to the additional administrative work required to have a UK VAT number and file the necessary returns, we opted not to register for VAT in the UK. Instead, we will move our products to an external platform, which will handle the VAT aspects on our behalf. We are aiming to have the migration completed by Q2 2021. After that, UK customers who are not registered for VAT will be able to buy our products.
We are aware that this is an unpleasant change, unfortunately we couldn’t find another viable alternative. The whole Brexit process has been chaotic and poorly managed for everyone involved. We will do our best to resume normal operations as soon as we can. In the meantime, if you have any question, please feel free to contact us. We will be happy to answer your queries.
The Aelia Team