What’s the £135 ‘consignment value’?
In a post-Brexit world, this is almost the most important change to know about when it comes to buying goods from an EU member state. As Callum Mason from MoneySavingExpert explains: “If you order online from the EU and the consignment value – the total order (minus delivery charges and taxes) – costs £135 or less, you shouldn't have to pay anything extra. VAT will be included in the price you're shown when you pay online – as it was prior to Brexit – and there's no customs duty to pay. As a result, you shouldn't face courier handling fees either.”
However, if the consignment value is higher than £135, then watch out. “£135 is the threshold above which customs duty kicks in (except on certain items, such as alcohol where it's lower) and it's also the point at which import VAT starts being charged,” explains Callum. Below are three extra charges you might end up facing:
Customs duty is a tax on goods that enter Britain – which explains why it isn’t a problem if you’re buying goods which are stored in a warehouse on British soil. Normally, it isn't charged on transactions between different EU countries, which also explains why most of us got used to not paying them while the UK was still part of the EU – and even during the transition period.
“Now though, you will usually have to pay duty on orders over £135, though the exact amount can vary significantly,” warns Callum. “It may be a percentage of the value of the order, but in other cases it may be based on the weight of the item, sometimes in combination with a percentage.”
The good news is, some items don’t carry customs duty even if their consignment value is over £135. A 'rules of origin' agreement between the UK and EU means goods largely produced or manufactured in an EU country are exempt from customs. But the rules are complicated, so you can find more information on Gov.uk.
Now that we're no longer part of the EU, on orders over £135, instead of paying normal VAT you'll be charged what’s call 'import VAT' instead. Like normal VAT, import VAT is typically 20%, and lower on some items. However, the difference is you don't just pay import VAT on the cost of the goods. Instead, says Callum, it's charged on the total cost of shipping the goods to the UK, i.e., the price of the goods plus the cost of transportation and customs duty.
“There have also been some changes to the way VAT is accounted for,” he warns. “Prior to this year some EU companies could collect VAT in their own country, but now sellers who sell to those in England, Scotland or Wales are supposed to register for VAT in the UK and collect UK VAT at the item's rate at the point of purchase.”
Before the UK left the EU, courier firms simply delivered items as normal. But now, their fees are more likely to reflect the costs of the extra admin they have to do when taking items through customs. This varies depending on which courier is being used. For example, MoneySavingExpert says Royal Mail typically charges £8, DPD £5 plus VAT, and FedEx charges 2.5% of the combined customs duty and VAT charge, or £12 – whichever is greater.
“While in some cases, some or all of these costs may be covered by the retailer, they will often be passed on to you as the buyer – and you may be asked to pay the courier directly when it delivers, or at the post office when picking up an item,” warns Callum. “To give an example of how these charges can stack up – a £150 jacket bought from a European online marketplace could attract 12% customs duty (though this varies by item). That's an extra £18. With 20% import VAT charged on top of that (£33.60) and a handling charge of £8 from the courier, the total cost rises to £209.60 – which means almost £60 in extra charges.”
Is it possible to ask for a refund if you don’t want to pay the charges?
If you're hit with unexpected extra charges, the good news is you do have some options. First, you can refuse to pay the extra charges, and not take the item. However, says Callum, this can be risky. “HMRC says if you refuse to pay, the courier firm will usually hold your item for three weeks, but if you don't pay the charges in this period, your item will either be returned to the sender or destroyed,” he says.
If the item is returned, the retailer should then refund its cost. However, there's no guarantee that will happen and you may not be able to get a refund from the retailer, so be warned.
What about reclaiming the charges once you receive the item – is that possible?
Alternatively, you can pay the charges to receive the item, then return it and reclaim (most of) the charges. Under consumer laws that apply in the EU, says Callum, you've a legal right to decide to return goods bought remotely within 14 days of receiving them, and then return them within a further 14. “However, in order to be able to return the item yourself, you'll likely have to first pay the extra charges to accept it, then send it back at your own expense (unless the retailer's offered free returns),” he says. The retailer should refund you the cost of the item, he says, and then:
You CAN'T reclaim courier handling fees or the cost of sending the item back.
Also, it’s worth noting you only pay import VAT and customs duty when goods are imported into Britain, so you won't have to pay these again when sending back (which is technically exporting) the goods.
But wait, aren’t some retailers offering pre-paid charges as part of the price?
There are certainly European retailers offering to pre-pay taxes and charges as part of the price when you check out online – which can be helpful in avoiding unforeseen surprises. It might not make the item any cheaper (in fact, it almost certainly won’t) but at least you’ll be aware of the bottom line before pressing ‘buy’.
Just be warned that some companies who prepay the customs charges claim these can't be recouped in the event of a return or refusal of goods. “HMRC says any business or individual that pays the customs charges should be able to make a claim for returned goods using the relevant forms (mentioned earlier), whether they are based in the UK or overseas,” explains Callum. “In this situation, it would be worth speaking to the firm that you've ordered from and seeing if it'll try to reclaim the charges from you.”
Even so, it's probably worth establishing before you buy an item what the procedure is for returns, and whether you'd able to claim back your customs costs in the event of a return. It is also the case that certain retailers are waiving customs charges for customers by bearing the cost themselves – again, this should be made clear in their terms and conditions.
What about for those shopping in Northern Ireland – are the rules different there?
The rules do differ for shoppers in Northern Ireland due to its unique position of remaining within the EU’s Single Market. Lauren Deiz from Which? explains: “Shopping between Northern Ireland and the EU remains more-or-less unchanged. However, the trade between Northern Ireland and Great Britain has become more complex. With the new rules and regulations, some retailers based in Great Britain have stopped sales to Northern Ireland. In January, for instance, supermarkets saw shortages of fresh produce while deliveries were being held up in the ports.”
While most of those teething issues have largely been smoothed over, it might still be worth checking with the company you’re buying from what their procedures are regarding Northern Ireland.
Finally, are debit and credit card charges changing?
Mastercard has announced it will increase its charges for UK credit and debit card purchases from EU-based merchants from 15th October 2021. “Mastercard’s fees will increase from the current rate of 0.3% for credit cards and 0.2% for debit cards, to 1.5% and 1.15% respectively,” explains Lauren.
Meanwhile, Visa has also revealed plans to increase credit card fees to 1.5% and 1.15% for debit cards. The fee will apply to transactions made by UK cardholders to EU merchants. “The new charges will be a substantial uplift on the EU capped charges and it’s likely that shoppers will feel the impact of this,” warns Lauren.
For more information on post-Brexit shopping charges, and when they apply visit the government website here.
*DISCLAIMER: Anything written by SheerLuxe is not intended to constitute financial advice. The views expressed in this article reflect the opinions of the individuals, not the company. Always consult with an independent financial advisor or expert before making an investment or personal finance decisions.