Distance selling and distance selling regulations are something that has been around for a long time. Before the internet came along people would have to read paper publications or watch TV to view and order products. Then they would have to call on the phone to receive goods from far away cities or another country. Since the dot-com boom, the global marketplace has shifted drastically. Selling online to consumers globally has become easier than ever over the last two decades. With more demand also comes more rules and guidelines when doing so, especially when it’s crossing borders.
Given the new global eCommerce marketplace, there are several standards that online businesses need to follow in this process. Important legislation has been enacted between countries to ensure a compliant selling experience when dealing with shipping products and overseeing distance selling returns. There are also distance selling threshold rules and important government guidelines that must be followed when selling goods.
Let’s discuss distance selling, distance selling regulations, and what you need to know.
What is distance selling?
The business of distance selling refers to many different forms of digital commerce. This includes mediums like website selling, telesales, and even television sales. Basically, if you and your customer don’t see each other, you are distance selling. This applies to both domestic and international sales.
Distance selling pertains to individuals (b2c) as well as businesses (b2b). Because the UK is no longer a part of the EU, all sales of physical goods to the EU now have new customs regulations and other changes. You can read more about those Brexit changes here.
Distance Selling VAT
Distance sales VAT is a value-added tax that is charged on goods at the point of sale. This can be for all types of goods from clothes to electronics and much more.
Do I need to register for VAT?
UK law requires businesses to register for VAT when sales exceed the threshold. The current UK threshold is £85,000. So, if you expect that your VAT taxable turnover will be more than this in the next 30 days, or a 12-month calendar period, you must register for VAT. Different countries have different distance selling thresholds which you can see here.
If you are past the threshold and you keep making sales without registering for VAT, you can face hefty fines. Registering late may make you liable for a penalty of 5 – %15 of VAT due. Basically, once you pass the threshold, register right away. Early registration is also encouraged.
How much do I charge for VAT?
The standard rate for VAT is 20% on most items. However, not all items are charged at that rate.
For example, some items like mobility aids for the elderly are charged at a much lower rate. Things like gas and electricity are charged around 5%. Sanitary products are at 0% whereas smoking cessation products are at 5%. See a list of VAT taxable items here.
Distant Selling to the EU
Goods sent to the EU or elsewhere are zero-rated for UK VAT. The customers are charged import VAT on arrival in the EU country where they are located. This type of delivery is known as DDU (duty delivered unpaid). This means the customer will have to pay their EU country import tax on the goods before receiving them (after the original purchase of the product). This differs from DDP (duty delivered paid) meaning it’s paid by the supplier and customers won’t be charged anything extra upon delivery.
Some 3pl businesses have considered expanding into other countries to counter the effects of cross border duty. By increasing proximity to the end customer, the fulfilment centre can maximize its reach as well as its ability to control service charges. This is known as cross border warehousing.
EU to UK Distance Selling
Distance selling VAT has changed a bit since Brexit. Before the transition, UK customers could purchase items anywhere in the EU without having to pay import duties. However, there are new Brexit VAT changes since January 1st.
UK VAT will automatically be added at the point of sale by the EU retailers up to £135, with no customs duty added. Anything above £135 will include import duty as well, anywhere from 0% to 25% depending on the item. Not a very favourable option, right? This is one of the most trying challenges for businesses and customers post-Brexit.
What are the online distance selling regulations in 2021?
When you are selling online there are many rules to follow when doing this domestically as well as internationally.
1) Offer terms and conditions – must be downloadable
2) Give your VAT number
3) Give your contact information (email, business address, phone number)
4) Give the total price with specific calculations
5) Give accurate and clear descriptions of goods or digital content
6) Give the total delivery cost and how it will be calculated
7) Offer a receipt of sale
8) Clearly state your return/refund policy
9) Confirm the distance selling contract
What is a distance selling contract?
A distance selling contract made between a supplier and buyer are made when the two cannot be together. This will be the main means of communication that clearly outlines the rights and responsibilities of the seller as well as the buyer. These are crucially important to protect both parties while adhering to government regulations.
1) Get a refund within 14 working days of receiving goods without a reason. This is known as distance selling “right to cancel.” This changes of course for certain products like CD’s, DVD’S, and computer software that can easily deteriorate – as well as other perishable items like flowers. Remember that the 14-day distance selling regulations start when the goods are received.
2) Receive goods within the time frame that was agreed upon, or items can be refunded.
The seller must provide information that is clear and in a format that is appropriate (such as terms and conditions in a contract, or verbally over the phone).
Rights of the seller
A seller has the right to:
1) Not refund a customer if they knew an item was faulty or damaged when they bought it.
2) Deliver goods within 30 days or less if no time frame was agreed upon
It’s important to stay updated with distance selling laws as much as possible. Long-distance selling regulations are there for honest and transparent business practices that encourage mutually beneficial relationships.