HAVE YOU BEEN WONDERING HOW CHANGES IN VAT WILL AFFECT YOU SINCE BREXIT?
Let’s find out!
Please note – this info is correct at the time of writing this post – 3rd February 2021 and circumstances may change in the future.
On the 1st January 2021 the UK & Northern Ireland left the EU regulatory framework with a n eye popping 1200 pages of legal jargon to wade through in only a few days. Politicians, Retailers, Traders and even Joe Bloggs on the street rushed to understand the implications of the agreement.
For us watch-folk, trading watches with European countries has changed significantly.
As a watch enthusiast, collector and professional dealer, I am affected on all fronts.
- Buying watches from Europe and bringing them into the UK
- And also Selling watches from the UK into Europe.
The whole show just got a lot more expensive, because even though we are aware of ‘tariff-free’ movement of goods across the new UK-EU border, ‘tariff-free’ doesn’t mean no VAT.
UK customers are now expected to pay UK VAT on all imports from the EU.
And as for our European brothers and sisters buying watches from me (and anyone else in the UK), they now have to pay their local sales tax (VAT, IVA, GST) in order to get their mitts on their new watch.
As an example, a £10,000 watch purchase from the EU will most likely come with a £2,000 VAT bill once the watch arrives at the UK border, that will need to be paid to the courier or to customs directly in order for the watch to be released.
In the past, with a system called the ‘VAT Margin Scheme’ when you bought a pre-owned watch you typically didn’t pay VAT on the full price. Instead, the dealer paid VAT only on the profits of the watch i.e. the difference of what they bought and sold the watch for.
Whilst the UK was part of the single market, this scheme applied across the EU. This means a customer in the UK didn’t need to worry about VAT when buying from a dealer in Germany and vice-versa.
This is no longer the case and, because the margin scheme will no longer apply, you (the customer) will need to pay VAT on the full price of the watch as opposed to the dealer paying VAT on their margin only.
VAT Margin Scheme Vs standard import VAT example:
- Let’s say your after a 2018 Rolex Submariner, currently trading in the UK at £10,000.
- If the dealer bought that watch for £8,000 you would effectively pay £400 in taxes under the VAT Margin Scheme because only the margin that the dealer makes is taxed.
- If you bought that same watch under a standard VAT system that tax would be £2,000, 20% of £10,000; the ticket price of the watch (a whopping increase in tax) because the total sale price is payable.
So of course, you can still buy from and sell to individuals and businesses in Europe, but you need to be aware that YOU will most likely need to pay 20% on top of the sale price in order to get the goods through customs and THEY will most likely need to do the same to receive their watch from you.
This will be true regardless of whether you are buying from a dealer or from a private individual on eBay or Chrono24.
In short, the buying and selling rules for trading with Europe, is now that same as trading with the USA, or Japan or any other non-EU country around the world.
- A UK based individual buying a watch from a European country, will most likely need to pay VAT at import.
- A UK based individual selling a watch to a person/business in Europe, THEY will most likely need to pay local VAT at import their end.
- A UK based individual buying a watch from a Japan / USA / Canada / Brazil, will most likely need to pay VAT at import.
- A UK based individual selling a watch to a person/business in Japan / USA / Canada / Brazil will mean THEY will most likely need to pay local VAT at import their end.
- A UK person buying / selling watches to another UK person or business = no extra VAT as the goods are already within the UK.
As far as exporting watches outside of the UK, I now have extra admin to take care of including the creation of a Pro-Forma / Commercial invoice with every shipment I make, including info such as declared value, description of goods, country of origin, HS code and more. And also ascertaining an EORI number for my business.
I have started including this standard message on all my product listings:
This news also means for that potentially for me, my watch trading playground has just shrunk exponentially unless I want the extra VAT cost and import admin of buying outside of the UK, and there are benefits to only buying from and selling to people or businesses within the UK and Northern Ireland.
I am hoping for a good free-trade deal between the UK and the US and Japan where there is rich stock of interesting, well priced pre-loved watches. And when I say “free-trade” I am hoping for 0% import VAT and not just ‘duty’ free trade. For now, I won’t hold my breath, but I will remain optimistic.
Please note, this information does not constitute as legal advice and it is recommended to seek a tax / import / export professional for legal advice, but this is my knowledge based on experience of watch trading for many years pre-Brexit and for a few months post-Brexit.
Please get in touch if you have any questions. I’d love to hear from you.
With best wishes,