News / Post-Brexit VAT on overseas parcels would be a 'no-deal stealth tax'

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Further scrutiny is being heaped on the UK government’s Brexit strategy with claims of a “no-deal stealth tax” and calls for special economic status for freight gateways.  

Head of consumer research at Parcelhero David Jinks has slammed the government’s £900m ‘Get Ready for Brexit’ campaign, claiming it provides business with “little new information”.  

He added: “But it does reveal that the £15 VAT threshold on overseas parcels would be quietly scrapped, should there still be a no-deal Brexit.

“Previously, parcels arriving in the UK worth £15 or less were exempt… following a no-deal Brexit, all VAT-rated goods arriving by parcel will be liable, no matter their value.  

“That means British shoppers buying from the EU and further afield will be paying 20% VAT of up to £3 on an item costing £15 – something they have never had to do.”  

Mr Jinks warned of “further complications” from news that overseas sellers would be held responsible for collecting VAT on all goods arriving in the UK up to the value of £135.  This would further require the sellers to be responsible for accounting for the VAT with HMRC.  

“That new level of complex VAT procedure could put off international traders and make us a far less competitive market,” Mr Jinks said.    

In other developments, a new trade campaign coalition has published a report calling on the UK government to grant special economic status to the country’s air and sea ports.  

Port Zones UK comprises several ports alongside the British Ports Association (BPA), the Institute for Exports and Regional and City Airports (RCA).  

It said the special economic status was necessary to “stimulate international investment, re-shore manufacturing and, ultimately, lower prices for consumers in a post-Brexit Britain”. 

It added: “Government announced plans to create up to 10 free ports (FTZs) after Brexit, allowing firms to import and re-export goods outside normal tax and customs rules. However, Port Zones UK’s A Licence to Operate: Enterprise, Development and Free Trade Zones looks in more detail at the potential policy measures needed to make FTZs a success.” 

The report claims “zonal” enhancements to planning systems and modifications to business-focused policies of enterprise zones must be implemented alongside any FTZs.  It also underscores areas for “policy focus”, including faster planning permissions and a reduction in delays caused by environmental legislation.  

Chief executive of the BPA Richard Ballantyne said: “As the UK recasts its global economic relationships, trade has never been so important to the fortune of the nation. However, to forge new agreements and transition existing ties, strong domestic foundations are needed to maximise the value of inbound and outbound business through our gateways.  

“In a marketplace where competition for capital, resources and personnel is fierce, it’s crucial vital transport nexuses are given necessary business conditions to continue to grow.” 

And the British International Freight Association (BIFA) has also questioned several government assertions.  

Last week, director general Robert Keen queried how a cash injection of £16m for customs training would lead to “thousands more” customs experts being on hand for Brexit day. 

He said: “During our meetings with both HM Treasury and HMRC, BIFA highlighted concerns of our members regarding the capability of the customs brokerage sector to increase capacity at a time when that sector already faces a huge shortage of staff of suitable quality. 

“We emphasised that it could take up to a year to train staff to be fully conversant to prepare a range of basic customs declarations, even if there was a sufficient number of trainers to train those staff, as well as relevant courses for them to attend.”  

Today Mr Keen added that those developing the system had “failed to engage any end users”, and furthermore, “failed to communicate updates” in the development process.  

“This is a dangerous oversight; end users determine what works in practice, particularly as developers have been flagging up a lack of clarity regarding data elements,” he said. 

“An example: LIC 99 indicates a licence waiver for all types of goods. It’s to be replaced with a waiver for individual licences, potentially adding complexity, making entry more difficult. 

“Furthermore, despite initial HMRC assurances to the contrary, it’s clear the new system will require more significant changes to commercial systems than previously envisaged.”