Online toy sellers are among the thousands of UK small businesses feeling the immediate sting of a Brexit trade deal that has shown early signs ‘of being no good for anyone in the business of selling to the EU.’
Retailers such as the online toy shop Kiddimax have been left reeling from the ‘severe blow’ to business that the UK government’s last minute deal has delivered, with higher costs from customs charges, import VAT and sales VAT all stacking up.
Operating out of its Lancashire office, Kiddimax once exported £600,000 of toys to France, Italy, Spain, and Germany. However, as most of those are made in China, the majority of its stock is now subjected to new tariffs when sent to the EU.
According to Kiddimax director, Andy Tauber, Brexit has cost the business around one-third of its sales, with import taxes of around 20 per cent, and sales taxes specific to each country sold to, leaving business with EU ‘virtually untenable’ for the small-time seller.
“There’s now an import VAT on everything over €22, we then have to pay sales VAT for that country, as well,” Tauber tells ToyNews. “So, you’re looking at 21 per cent sales VAT, 20 per cent import VAT, €5 customs clearance on everything over the €22 Euro threshold. There’s literally no way around it.”
Kiddimax is one of a number of small UK businesses to have been working with the tax advisory service, Avalara in the run up to changes surrounding Brexit. Avalara has estimated that around 150,000 UK businesses that sell via online marketplaces have been hit with higher costs as a result of it.
In an interview with ITV earlier this week, Avlara’s vice president of global tax, Richard Asquith, said: “It’s the small businesses that are trading on big marketplaces – like Amazon and eBay – that are hit the hardest.
“They are the ones having to cope with extra paperwork and taxes and they are just not set up for it. They are losing business to their European competitors.”
Avalara has calculated that around 27,000 small UK e-commerce companies will have to register for VAT in each EU country they sell into at an average cost of £28,800 a year. It’s that, or stop exporting to the EU.
“We are just pushing the UK sales and severely reducing our EU business,” Tauber tells ToyNews. “We’re selling the lower priced items to the EU and the US. The problem is, that’s not a sustainable answer – unless you start selling a van load more of the cheaper stuff.”
Bypassing the delivery duty for an online business such as Kiddimax is an equally unsustainable answer to the rising costs of dealings with the EU. For an operation that relies on positive feedback left by customers, such a move would be a ‘fast track way to negative feedback and loss of business.’
“So, changing to delivery duty paid is the only real way, but this increases the cost with sales VAT for the country it’s delivered too, import VAT, and customs charges,” says Tauber.
“I have mixed emotions about it all at the moment, and I will continue to push on, but there’s no good news story here. I can’t see how this deal will be good for anyone in the business of selling into the EU.”