Post Brexit import experiences

[pmx-berlin]

Are there any experiences how the evil brother SB handles this matter?

 

[MrProper]

I try again to explain my point of view. Unfortunately my English is really bad, but I hope that it will be reasonably understandable.

1. Do I like the way Aero handles VAT? No, definitely not.
2. Is it illegal? I do not think so.

I'm trying to explain that.
If a company in UK displays a price on an advertisement, website or similar, then this price for the end customer in UK must include VAT. For business customers, the price is usually shown without VAT, as VAT is not relevant in B2B.
So if an end customer from the UK orders a product from Aero, then it is clear that the price, e.g. 680 GBP, includes VAT and that the VAT is also shown on the invoice.
Exactly the same applied to EU customers before Brexit, as this was regulated accordingly.
I think we can certainly agree on that.

If a company in the UK exports goods to another country, the company is allowed to set the VAT to 0 because the VAT is only relevant if the goods are used within the UK.
Before Brexit, this already applied to all countries that were not in the EU and, since Brexit, also to exports to the EU.

I think there should be agreement here as well.

In the case of an export, the company in the UK now has two options:
1. The prices are for the UK market as well as worldwide including VAT. In this case, the company will deduct VAT from the price when exporting and show 0% on the invoice. When importing, e.g. into the EU, the VAT of the respective country is due and thus all end customers, regardless of whether they are in the UK or EU, pay more or less the same price.

2. The prices are for the UK market including VAT, but excluding VAT for the world market. Every company can handle this as it wants, because pricing is free. This means that the end customer in the UK pays 680 GBP including VAT and all others outside UK pay 680 GBP excluding VAT. Therefore, the invoice also says 680 GBP and 0% VAT.

As long as there is no agreement that prices must also be displayed transparently for customers outside of the UK, there is nothing illegal about point two.

Assuming that the company in the UK makes the majority of its sales with exports and only a little within the UK, then the procedure in point 2 makes perfect sense from a business perspective.

Does this have to please an end customer outside the UK? No of course not. Can he do something about it? Also not as long as this is not regulated in trade agreements.

On Aeros website you can find the following:
"PLEASE NOTE: Your postage charge covers the carriage of the goods from here to your door and does not include any calculation of the duty/sales tax which may or may not be applied in any country which we export to.
Each countries' government have their own laws, regulations and tariffs etc. which they levy on such imports of foreign goods.
This is beyond our control regardless of which country goods are shipped to and is down to each governments' policy concerning the importation of goods."

That could certainly be presented in a more customer-friendly way and it could statet clear that prices are exclusive VAT outside UK.

In summary: No, we customers outside the UK do not pay VAT twice, but a different, higher price applies to us than to customers within the UK. Not pretty, but that's how it is.

 

[Imuricecreamman]

From Gov.uk:

VAT on exports
VAT is a tax on goods used in the UK and you do not charge VAT if goods are exported from:

• Great Britain to a destination outside the UK
• Northern Ireland to a destination outside the UK and EU .

You can zero rate the sale, as long as you get and keep evidence of the export, and comply with all other conditions. You must also make sure the goods are exported, and you must get the evidence within 3 months from the time of sale. This can be longer for goods that need processing before export and for thoroughbred racehorses.

The time of sale is the earlier of the day you:

• send the goods to your customer
• get full payment for them

You must not zero rate sales if your customer asks you to deliver them to a UK address. If the customer arranges to collect them from you (an indirect export), you may be able to zero rate the sale as long as you meet certain zero rating conditions.

 

[nattevagten]

Are there any experiences how the evil brother SB handles this matter?

+1
I'm considering placing an order, so it would be good to know indeed. Anyone with recent experience...?

 

[Carlos840]

2. The prices are for the UK market including VAT, but excluding VAT for the world market. Every company can handle this as it wants, because pricing is free. This means that the end customer in the UK pays 680 GBP including VAT and all others outside UK pay 680 GBP excluding VAT. Therefore, the invoice also says 680 GBP and 0% VAT.

I don't understand how you can justifie this to yourself...
It's either Aero scamming people outside of the UK by not telling them they are keeping the value of the UK VAT for themselves, or it's Aero telling customers outside of the UK that they deserve to pay a 21% foreigner tax for ordering from outside the UK.
Either way, it is a crap thing to do, it might not be illegal, but it is definitely immoral.

Customers outsid of the UK don't pay actual VAT twice, but they do pay VAT value twice, it's just that Aero is keeping one of the payments.

 

[MrProper]

I don't understand how you can justifie this to yourself...
It's either Aero scamming people outside of the UK by not telling them they are keeping the value of the UK VAT for themselves, or it's Aero telling customers outside of the UK that they deserve to pay a 21% foreigner tax for ordering from outside the UK.
Either way, it is a crap thing to do, it might not be illegal, but it is definitely immoral.

Customers outsid of the UK don't pay actual VAT twice, but they do pay VAT value twice, it's just that Aero is keeping one of the payments.

Well, I didn't say I like that.
I only described how it is handled and that it is probably not illegal.
To add a different point of view: You could also say that customers outside the EU don't pay more, but that UK customers get a local discount ;-)
This is done in some tourist areas where the locals have to pay less.
Anyway, I don't like it. I can't say to what extent this will affect Aero's image.
As a customer, however, I can decide whether or not to support this in the future.
But the way I read it, Aero is working on this topic. I'm curious to see how will be the result.

 

[Carlos840]

Second try.

The way i understand it this is what is currently hapenning.
You buy from the UK, you get an invoice like this:

Clearly, Aero is charging you 662.50GBP, but they are paying 110.42GBP VAT, so they are making 552.08GBP on your sale.

If you buy from outside the UK, you will get an invoice like this:

Aero is charging you 662.50GBP, but they have no VAT to pay on that sale, so they are keeping 650GBP for themselves, and you get the privilege of paying an extra 20% VAT to your own country. You paid VAT value twice, only one was a legitimate VAT payment, the other one was just an Aero "foreigner tax".

If Aero showed VAT free prices on their website and only added VAT to the UK sales i could understand your point, but with the way they are doing it they have clearly just decided they where ok shafting non UK customers.

(full disclosure, i edited the second invoice as an example, if someone has pre and post Brexit invoices buying from outside the UK to show i would love to see them.)

 

[Imuricecreamman]

Second try.

The way i understand it this is what is currently hapenning.
You buy from the UK, you get an invoice like this:

Clearly, Aero is charging you 662.50GBP, but they are paying 110.42GBP VAT, so they are making 552.08GBP on your sale.

If you buy from outside the UK, you will get an invoice like this:

Aero is charging you 662.50GBP, but they have no VAT to pay on that sale, so they are keeping 650GBP for themselves, and you get the privilege of paying an extra 20% VAT to your own country. You paid VAT value twice, only one was a legitimate VAT payment, the other one was just an Aero "foreigner tax".

If Aero showed VAT free prices on their website and only added VAT to the UK sales i could understand your point, but with the way they are doing it they have clearly just decided they where ok shafting non UK customers.

(full disclosure, i edited the second invoice as an example, if someone has pre and post Brexit invoices buying from outside the UK to show i would love to see them.)

My invoice from early 2020 said 0 VAT. I'm surprised reading the law text that the IRS are so lenient in businesses abilities to zero tax export goods.

 

[Marc mndt]

Second try.

The way i understand it this is what is currently hapenning.
You buy from the UK, you get an invoice like this:

Clearly, Aero is charging you 662.50GBP, but they are paying 110.42GBP VAT, so they are making 552.08GBP on your sale.

If you buy from outside the UK, you will get an invoice like this:

Aero is charging you 662.50GBP, but they have no VAT to pay on that sale, so they are keeping 650GBP for themselves, and you get the privilege of paying an extra 20% VAT to your own country. You paid VAT value twice, only one was a legitimate VAT payment, the other one was just an Aero "foreigner tax".

If Aero showed VAT free prices on their website and only added VAT to the UK sales i could understand your point, but with the way they are doing it they have clearly just decided they where ok shafting non UK customers.

(full disclosure, i edited the second invoice as an example, if someone has pre and post Brexit invoices buying from outside the UK to show i would love to see them.)

Here's mine, pre-brexit sale shipped to the Netherlands.

I'm pretty confident that if I bought today, total amount would be equal to net total. I'm not ordering anything from Aero right now, because I do feel like they're pocketing 20% extra on my sale (and I'm effectively paying 21% more for the same jacket)

 

[Blackadder]

Just to restate, « worldwide price » isn’t a thing. They’re either collecting VAT or not collecting VAT when you’re buying the item. If they’re collecting UK VAT, it should be deduced when they export it to another country for the applicable VAT to be applied by the customs upon entry. Customs duties and fees are a different story and is an up-charge to import goods. An item cannot be VAT inclusive and non VAT inclusive with no variation in price just based on the country of shipping otherwise you’re either over-collecting or sub-collecting tax for it. This wouldn’t sit well with your local Treasury Office unless you’re invoicing differently to the customer and in your books but that’s not legal and penalizes the customer so it’s a weird practice for a business. Worst case you’re pocketing the difference but that’s also illegal.

I doubt the UK authorities are gonna take action over this grey area. It is not like they are evading UK VAT so what if there are price discrimination as long as it is on the overseas buyer.

I try again to explain my point of view. Unfortunately my English is really bad, but I hope that it will be reasonably understandable.

1. Do I like the way Aero handles VAT? No, definitely not.
2. Is it illegal? I do not think so.

I'm trying to explain that.
If a company in UK displays a price on an advertisement, website or similar, then this price for the end customer in UK must include VAT. For business customers, the price is usually shown without VAT, as VAT is not relevant in B2B.
So if an end customer from the UK orders a product from Aero, then it is clear that the price, e.g. 680 GBP, includes VAT and that the VAT is also shown on the invoice.
Exactly the same applied to EU customers before Brexit, as this was regulated accordingly.
I think we can certainly agree on that.

If a company in the UK exports goods to another country, the company is allowed to set the VAT to 0 because the VAT is only relevant if the goods are used within the UK.
Before Brexit, this already applied to all countries that were not in the EU and, since Brexit, also to exports to the EU.

I think there should be agreement here as well.

In the case of an export, the company in the UK now has two options:
1. The prices are for the UK market as well as worldwide including VAT. In this case, the company will deduct VAT from the price when exporting and show 0% on the invoice. When importing, e.g. into the EU, the VAT of the respective country is due and thus all end customers, regardless of whether they are in the UK or EU, pay more or less the same price.

2. The prices are for the UK market including VAT, but excluding VAT for the world market. Every company can handle this as it wants, because pricing is free. This means that the end customer in the UK pays 680 GBP including VAT and all others outside UK pay 680 GBP excluding VAT. Therefore, the invoice also says 680 GBP and 0% VAT.

As long as there is no agreement that prices must also be displayed transparently for customers outside of the UK, there is nothing illegal about point two.

Assuming that the company in the UK makes the majority of its sales with exports and only a little within the UK, then the procedure in point 2 makes perfect sense from a business perspective.

Does this have to please an end customer outside the UK? No of course not. Can he do something about it? Also not as long as this is not regulated in trade agreements.

On Aeros website you can find the following:
"PLEASE NOTE: Your postage charge covers the carriage of the goods from here to your door and does not include any calculation of the duty/sales tax which may or may not be applied in any country which we export to.
Each countries' government have their own laws, regulations and tariffs etc. which they levy on such imports of foreign goods.
This is beyond our control regardless of which country goods are shipped to and is down to each governments' policy concerning the importation of goods."

That could certainly be presented in a more customer-friendly way and it could statet clear that prices are exclusive VAT outside UK.

In summary: No, we customers outside the UK do not pay VAT twice, but a different, higher price applies to us than to customers within the UK. Not pretty, but that's how it is.

Well, it is arguable because price discrimination is like any other type of discrimination, so if it is aimed at race, gender or nationality, it may be illegal.
https://europa.eu/youreurope/citizens/consumers/unfair-treatment/unfair-pricing/index_en.htm
I guess this no longer applies to UK after brexit.
BTW, Aero tried to justify in the past (before brexit) for this discrimination by claiming inter alia
1) their product price in Japan is so much higher;
2) admin costs relating to "overseas" return is high. Overseas did not include Europe back then.
That I guess is the basis of their defence against the discrimination against nationality issue.

 

[Carlos840]

Here's mine, pre-brexit sale shipped to the Netherlands.

View attachment 329537

I'm pretty confident that if I bought today, total amount would be equal to net total. I'm not ordering anything from Aero right now, because I do feel like they're pocketing 20% extra on my sale (and I'm effectively paying 21% more for the same jacket)

Great, now we need someone to post a post brexit sales invoice from an EU sale.

 

[Mich486]

The likely solution will be for Aero to raise their price ex-VAT so everybody including UK customers will pay a little bit more but foreign customers would not be charged this shady hidden VAT (on which they also pay local taxes). This is how it normally works. Not sure what it has to do with any new website.

 

[nattevagten]

The website should recognise where you are ordering from and hence adjust the price automatically (i.e. remove UK VAT if you are ordering from outside of the UK). Their current web solution might not have this functionality. All there is to it.

 

[Blackadder]

The likely solution will be for Aero to raise their price ex-VAT so everybody including UK customers will pay a little bit more but foreign customers would not be charged this shady hidden VAT (on which they also pay local taxes). This is how it normally works. Not sure what it has to do with any new website.

The issue is two-folded as illustrated in the link I posted.
1) is there complete price information?
2) is the pricing discriminatory?
point 1 relates to the information provided on the website. Since it is online transaction, listing the "complete price information" on an invoice may arguably be too late.

 

[Rabbit]

Very good content here, I'm glad we're discussing this. The way Aero has handled this so far certainly won't sit well with EU customers.
Shipping policies should be all about transparency. As it is, we can only make our own assumptions whether Aero has (1) simply "overlooked" the issue, (2) ignores the issue/ keeps the money, or perhaps (3) handles it but doesn't convey that in its policy.
I find that very irritating. We shouldn't be left with assumptions, expecially when there are no indications that they're doing anything other than (2).

On top of that, there is the topic of UK-made products. Such products are exempt from tariffs (not VAT, only the product-specific tariffs) when exported to the EU as long as they are correctly marked on the customs form using the appropriate codes.
In other words, since Aero produces in the UK it would be in an ideal position to be able to guarantee EU customers that whatever they buy will cost them almost the same as it would have pre-Brexit: VAT could be deducted and would then be charged by the recipient's country, plus the handling charge by the courier DHL Express that they're using.

That would actually be good for business when so many other UK companies have no possibility of preventing their EU customers from looking elsewhere (i.e. inside the EU) to shop, just because their products are not UK-made.

This is what the UK government website says re VAT charges:
https://www.gov.uk/guidance/vat-on-goods-exported-from-the-uk-notice-703#:~:text=VAT is a tax levied,in this notice are met

quote:
"VAT is a tax levied on goods and services consumed in the UK. When goods are exported they are ‘consumed’ outside the UK and to impose VAT on such goods would be contrary to the purpose of the tax. Therefore, the supply of exported goods is zero-rated provided the conditions in this notice are met."

I'm not a lawyer and I always have trouble translating legal text into plain English but I fear the above posters are correct in their assessment that what Aero is doing as of now is probably not illegal or perhaps just not covered by law, although in my opinion clearly immoral. Re immorality, apparently that's how the UK Gov sees it too ("contrary to the purpose of the tax").
The issue is not only that they keep the money. I say it's immoral because they're not transparent about it. There is a difference.

 

[Carlos840]

The likely solution will be for Aero to raise their price ex-VAT so everybody including UK customers will pay a little bit more but foreign customers would not be charged this shady hidden VAT (on which they also pay local taxes). This is how it normally works. Not sure what it has to do with any new website.

Aero could just not charge VAT to foreign clients, or refund it.
My brother runs an online bass shop.
Prices shown online include VAT. If someone outside of the EU orders via email he removes VAT before sending the invoice.
If someone buys straight from the website he issues a refund for the equivalent of 21% before he ships.
That's the honest thing to do.

 

[Rabbit]

Incidentally, I wrote two emails, one to enquiries@ and one to christine@ but got no reply yet. That was earlier this week.

 

[navetsea]

price discrimination is everywhere including here in my country, if as foreigner you buy through some local website here last time I check they would use exchange rate of $1 = Rp 10.000(rupiah) to make it easy for themselves to calculate, I don't know if you have to pay shipping fee or not on top, so the price looked more expensive thus more respectable in "higher price = higher quality" belief system, while our currency rate is $1 = Rp14.500 currently, and if as a local person we buy the same jeans, obviously not through their website but through IG direct message or Whatsapp or through their local online outlet from mobile phone local marketplace app, we pay a lot cheaper, it doesn't feel cheap for local market since our income is also much lower, but yeah we pay alot less for the same pants around 33% less... maybe it is a form of patriotism?

 

[Rabbit]

... maybe it is a form of patriotism?

Could be. What goes against the grain for me here is the lack of transparency about it. They can't possibly believe that their customers will be too indifferent to notice.
And we are talking about exactly one venue where the sales take place, aside from factory visits of course. Not several.

 

[Bat02]

I'm not even sure we're interpreting the " the supply of exported goods is zero-rated provided the conditions in this notice are met" correctly. Still from the UK gov site : "Zero-rated means that the goods are still VAT-taxable but the rate of VAT you must charge your customers is 0%. You still have to record them in your VAT accounts and report them on your VAT Return.". To me this means: "VAT should be deduced when exporting" not "UK companies are free to sale at full price and put VAT at 0". That would go against the other mention in the policy that says: "VAT is a tax levied on goods and services consumed in the UK. When goods are exported they are ‘consumed’ outside the UK and to impose VAT on such goods would be contrary to the purpose of the tax.".

Here's the comparison between pre and post Brexit invoices:


As it was suspected, in the post-Brexit one, the price breakdown lists the price of the jacket as full price and VAT at 0. But we've already established that for a UK based customer, that invoice would have been different: Net total would be 424 and VAT would have been 106. The 106 should have been deduced and VAT deduction should be clearly stated in the invoice as the policy above states. That way the tax authorities can make sure that the company is not avoiding tax and pocketing the difference.

Still from UK Gov (https://www.gov.uk/tax-on-shopping/where-you-see-vat):
Where you see VAT
In shops
Any VAT due is already included in the price of something you buy in a shop. No tax is added when you pay.

That's pretty logical because those policies are here to protect tax authorities and customers. You shouldn't have to guess if a price is inclusive or exclusive of tax. It should be clear to the customer how much he'll have to pay to buy the goods.
And no, a price can't be inclusive of tax in one scenario, and exclusive of TAX in another for the exact same reason.

Looking at other businesses in the UK, you can see that this is a relatively big issue because Iron Heart and Private White VC had to address it. If they could have simply charged full price and put VAT at 0, they would have done just that. I also believe that Aero's comment saying they'll launch a new website that will address this issue is also indicative that they know they're doing something wrong.

With all that said, we should be happy that Aero exists and didn't go under especially in those troubled times. I'm angry but can afford the price difference. It just plain irritates me because it's expenses that I hadn't planned for and I feel cheated but not to the point I would hate the brand. It's just bad/ fraudulent practice.