by Anna Thibout
With Brexit fast approaching and the prospect of a No Deal looking more likely, we thought we'd pull together a few resources to help UK based Shopify merchants work out what they might need to change in their Shopify setup from the 1st January 2021.
Firstly, a couple of caveats:
- We're still not sure exactly what's going to happen - a last minute deal or deferral could change everything!
- We're not tax, customs or legal experts at Statement. We're covering about things from a Shopify setup angle here - so please check with relevant tax advisers, etc. to ensure your liabilities are covered.
Firstly, there are a few really useful resources that it's worth spending some time reading which cover things we won't touch on:
- The Shopify Plus webinar recording to Getting ready for Brexit and the slides that were presented
- Brexit 10-point checklist for ecommerce sellers from Avalara
- What Brexit Means for ecommerce from the Shopify Plus blog
- UK taxes and Brexit from the Shopify Help Centre
It's also a really good idea to visit the GOV.UK transition website, which talks through a LOT of different topics and guides you through the changes. Fundamentally, selling from the UK to the EU will become an export – rather than a dispatch. This changes a lot of things - you'll need to make customs declarations for goods going from the UK to the EU from 1st January and register for an EU EORI (Economic Operator Registration and Identification) number, for example.
Rather than repeat everything from all of these resources, here we're going to focus on a few key elements that you might need to change in your Shopify settings come 1st Jan.
From the UK taxes and Brexit article above, one of the key takeaways is the change in rules on taxes in the UK and EU. Some UK merchants might be required to register and account for import VAT in the EU - and registrations might be required across multiple EU member states depending on a number of factors. We suggest consulting a tax professional and referring to the GOV.UK transition guide. For many merchants, a 0% (zero-rated) VAT will be applied.
Shopify's new tax settings support adding registrations for the UK and the EU, which will mean tax is charged at the rates it should be. If you're still using Shopify's legacy tax settings where taxes are configured manually, we'd suggest moving to registration-based taxes in the Shopify admin. If you don't, then your old tax settings will still apply after 1st January.
Shopify has a guide on how this works and how to set it up: https://help.shopify.com/en/manual/taxes/eu/eu-tax-migrate
You can set up UK taxes by going to Settings > Tax > United Kingdom and adding your VAT registration number here.
If you do need to register for VAT in any other EU country, you can also add the registration numbers into Shopify in the same way under the "European Union" tax setting. We wouldn't really be able to advise whether or not you need to register anywhere other than the UK - this depends on a number of factors e.g supply chain, goods delivered, so consult your tax professional on this.
As goods from the UK to the EU (and vice-versa) will become exports and imports, it's likely that customs duties will be due. This could all change if a last minute free-trade deal is made. It's worth thinking about though!
Duties are typically charged in two ways, DDP and DAP.
- DDP is Delivery Duties Paid. This is where the merchant assumes responsibility of paying the duties - this is usually done via your delivery / courier service.
- DAP is Delivered At Place. Also known as DDU (Delivery Duties Unpaid). In this scenario, the merchant only takes care of shipping the goods. The customer then pays for any import costs. This prevents the merchant having to manage the process, but can "sting" the customer.
There's an article on the Shopify documentation on the options for DDU duties. Essentially, the options are:
- Plan this as part of product pricing and soak up the cost.
- Increase delivery costs to EU countries to soak up the cost. Shipping rates a can be managed at Settings >
- Use a third party app to calculate duties during checkout and present these at checkout. There are a number of apps available to accommodate this e.g Zonos. These apps have their own associated costs (e.g. $20 + 1.9% for international orders for Zonos) so that needs to considered too! It's worth noting that these apps provide shipping rates, so may not work in tandem with shipping apps such as Parcelify, Advanced Shipping Rules and Bespoke Shipping, and may need to replace these apps for international orders. Remember: whenever changing shipping rates, test these thoroughly on your checkout.
It can also be helpful to ensure all your products have HS Codes to help with customs duties processes.
DDP or DAP?
In the short term, it might be that you assume a DAP approach on duties for ease of setup, and review this over the coming weeks, rather making any major changes to processes over the festive period.
If you are using DAP, then it's important your customers know about any charges they might need to pay - otherwise they may refuse to pay, leading to returned goods.
Make sure you update your policies! You can do this through your Shopify admin - either via Settings > Legal or Online Store > Pages, depending on how your policy pages are set up.
For your shipping policy, make sure you detail the approach for duties - for example is you're using DAP, the customer is the importer of record and assume responsibility for the payment of duties.
Equally, don't forget to update your return / refund policy. For example, you'll need to consider whether duties will be refundable or not if you're paying for customers duties (DDP). It's not always easy to claim refunds from customs agencies / shipping carriers so this could lead to a loss of revenue.