The following blog is part of a 4-part series which explores our experiences with businesses in the international ecommerce space. This instalment is a discussion about taxation liabilities in ecommerce, specifically for the UK. It’s an issue we’re seeing more and more and it’s starting to catch a lot of early exporters out – especially those looking to grow their international ecommerce business.
Solutions to many common ecommerce problems are resolved by learning about the basic export processes businesses use to manage export risk and ensure export compliance with markets overseas.
As ecommerce continues to grow at unprecedented rates, we can expect Governments to introduce more scrutiny to these ecommerce shipments. Now is the time to get your export processes, export documentation and trade compliance under control.
Taxation Liabilities in International ecommerce
As an export consultancy, we understand that sometimes you just need to get in and get going and then work through some of the more complicated issues later. You can truly get bogged down in the details.
However, we are big supporters of doing the research first and finding the right export management team to support you to get it right the first time.
The issue with ignoring the details when you’re starting out (especially when we are talking about foreign tax revenue) is that foreign Governments have a tendency, and some might say a fondness for backdating things.
This backdating can mean you’re potentially left with the bill. This is a big risk – and at CVEN we don’t like exposing our clients to export risk.
There are a lot of different scenarios we can review with businesses exporting to many different markets. The details alone would quickly turn this friendly blog into a thesis. We’d also like to point out that tax is a specialised field and we will call on our foreign tax partners to ensure our clients get the right information. So, with that said – lets head to the UK and consider a client’s experience with the UK’s value added tax (VAT) requirements.
Growing Exports in the UK Ecommerce Market
The UK, as we’re sure you’re aware, has been undergoing some significant changes as it navigates its exit from the European Union. If you’ve read some of the challenges the policy gurus have been trying to contend with, it’s quite extraordinary. Recent CVEN projects in UK and Ireland have highlighted some of the amazingly complicated processes the counties are having to implement just to keep business moving – and all during a global pandemic.
In the interest of trying to keep this a light read, we want to discuss a real-world ecommerce example. How something as simple as the GST can be so confusing to foreign businesspeople. In this example, we are going to be the confused parties and we are talking about VAT in the UK.
The Case Example
An Australian food manufacturer recently engaged us to create a pathway through the maze of web pages under the HMRC. Also known as Her Majesty’s Revenue & Customs Office, these guys are the UK’s tax, payments and customs authority. They collect the money that pays for the UK’s public services.
The need was for the Australian entity to have a UK VAT Number and to be reporting its VAT liabilities to the HRMC, not unlike what you do here with the ATO quarterly.
The sales platform was UK Amazon and while they were going to support the tax collection and remittance, the Australian entity has an ongoing responsibility to meet the reporting requirements.The company was classified as a non-UK seller (i.e based outside the UK) and shipped cargo into the UK to be fulfilled by UK Amazon. Among the many emails they received from Amazon, the important ones about urgently sorting out their VAT registration went un-actioned. The result from UK Amazon was to shut down their online store.
The rush was now on to get the UK VAT registration in place and ensure the company was in compliance with the HMRC requirements. If you’re going to play in someone else’s sandpit, you need to follow their rules.
While the process was not overly difficult, there was a lot of learning for the business to do. It also forced the company to establish some new admin procedures and identify a new partner to support their ongoing liabilities with the HMRC. Importantly, such instances trigger an awareness of the tax liabilities that Australian companies face when selling in a foreign market.
Taxation liabilities in ecommerce can be a boring topic (not unlike our blog on marine insurance) but it builds on a common theme which is to get it right the first time and ensure you have your export risk management front of mind when dealing internationally.
In our experience, solutions to many ecommerce problems are often easily resolved with a little research, preparation and process tweaks. If you need some more details on what you could be doing better, speak to the team at CVEN. We will be only too pleased to ensure you’re on the right path.
Previously in our e-commerce series:
- International eCommerce: Invoicing and risk – Are your international invoices the same or similar to your domestic invoices? If so, then this is an important read for you.
- Ecommerce and International Compliance – As you fast become an ecommerce tycoon, your understanding of export trade compliance is vitally important.
Coming up in our e-commerce series:
- Logistic options – This is gold as it’s a key part of the process. Get it there cheap and fast and minimise any headaches.
Who is CVEN?
CVEN is your team of international trade specialists.
We understand the difficulties involved with starting and growing your export. CVEN is an export management company with over 25 years of experience providing export solutions to business. We get to work tackling the export side of things, so you can stay focused on running your business.
If you’ve hit a roadblock with your ever-growing online business, get in touch. We’ll help get your international ecommerce operations running smoothly.