UKTI launches new package to boost SME's exports

With UK online retail exports set to reach £60bn by 2018, UK Trade & Investment has launched a new package of measures designed to boost SME’s export capabilities.

The e-Exporting Programme has been created to ensure UK companies are best placed to tap into the huge opportunities that exist online.

Over the last decade the growth of technology has dramatically changed consumers’ purchasing habits. Popular e-market places include Amazon, Tmall and eBay, and UKTI have identified over 400 e-marketplaces worldwide.

But before entering into any cross border transaction, including online retail, it is vital to give consideration to the various tax implications.

For example, when trading with private consumers within the EU, the sales will normally be subject to UK VAT, but once sales to a specific jurisdiction exceed a ‘distance selling threshold’ you will be required to register for VAT in that state.

So, for instance, a business can sell taxable goods to the value of 100,000 Euros to consumers in France and these sales will be subject to UK VAT.

Once this threshold is exceeded, the UK business will be required to register for VAT in France and account for VAT on the sales there.

It may be commercially beneficial for the UK business to voluntarily register for VAT in the other EU member state if the VAT rate in that country is lower than the UK.

It’s important to note, though, that language barriers and unfamiliar administrative procedures can create difficulties so we always recommend a local adviser who can assist with registration and ongoing compliance.

It is also important to appreciate that sales outside of the EU are treated differently for VAT purposes and there is often a requirement for a UK exporter to register for VAT in a country outside the EU if it is acting as importer of those goods.

Each country has different VAT rules and we therefore recommend that you understand these rules before entering a market.

Careful thought is also needed as to where you intend to set up an online platform and more importantly where contracts are finalised, as this could inadvertently result in a business being resident in two different jurisdictions. A dual resident won’t in all cases be taxed in both states but it will cause unnecessary complications, or even in some cases result in a higher tax rate than expected. If you’re considering entering into cross border sales, professional advice is strongly recommended to ensure that you are aware of all international tax matters.