Ian Benton and his wife Alison Ross run La Chambre Paris, an e-commerce site which sells high quality and responsibly sourced bed linen for an affordable price.
They initially launched it aimed at the French market, but found they were also getting a significant slice of custom from the UK in the 18 months since the company launched.
Ian, who is British, said: “Like most businesses we were waiting to see what was going to happen with the negotiations before trying to understand the impact for us.
“The deal that was signed is better than a no-deal scenario but it is becoming very clear but it is becoming very clear that the impact of leaving the EU is only just starting to be understood by businesses and the government
“The headlines of achieving a Tariff Free / Free Trade Deal does not reflect the true impact on all businesses of the UK's decision to leave the EU. This is not going to be fully understood for a number of months.”
Once the deal between the UK and the EU was signed on December 24th, businesses were left to figure out the details ahead of the new rules coming into force on December 31st.
For Ian and Alison the major headaches are around two areas – VAT and shipping costs.
As they are not selling food products they have been spared the strict new regulations on certain food types, but do have to contend with other issues.
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They are spared import tariffs and believe that the rules of origin requirements will also be minimal, since all the company's products are made at an eco-responsible factory in Portugal.
Ian said: “The impact of Brexit is for us hidden in the details and the complexity it creates. For us it is going to create multiple ongoing problems and costs if we want to keep shipping into or out of the UK.”
Previously, businesses registered in the EU paid any VAT that was owed in the UK via the joint EU system, but now any business that provides sales or services in the UK must register for a British VAT number.
This applies to companies that deliver goods to the UK but also those – like The Local – which provide services.
As an EU supplier of digital services to the UK, we have always paid UK VAT via the EU system. The UK government is now insisting we have to register separately for UK VAT. They updated their information… a few hours before the rules came into effect. https://t.co/fhJwTSmRNZ pic.twitter.com/IPOqBuyayD
— James Savage (@SavLocal) January 10, 2021
But registration is only the start, businesses then enter a complicated set of rules which vary depending on whether the sale is worth more or less than €135.
For Ian, his business covers both sides of this divide.
He said: “We have not been able to ship our orders to the UK yet because we have not received our UK VAT number. This is going to take 30 days so in the meantime we are keeping our customers up to date with what is happening and they are being patient which we really appreciate.
“Once we get the number we then have to do quarterly VAT returns in the UK.
“For orders under €135 we have to collect VAT on them at the time or purchase but for orders of more than €135 we are not supposed to collect the VAT, which means customers could receive extra charges for VAT on delivery.”
The other major factor that affects Ian's business is the cost of delivery.
Since Brexit there are extra regulations and restrictions in place for people sending mail between the UK and the EU, and these also apply to businesses.
Ian said: “Our shipping costs to the UK are roughly €8 – €14 per package but we will have to add an additional €4.90 for each package that will pay the customs processing by our logistics provider – in this case Colissimo International. On an order of less than €135 these costs are significant.
“We were offering free shipping the UK before Brexit (as a trial) but we now cannot afford to keep doing that as the additional costs are too expensive.
“For any business that is selling low priced products these additional costs will make shipping to the UK unprofitable.
“For orders of more than €135 we will have an additional processing cost of €16.90 per order that we have to pay to our logistics providers (Parcelforce) for them to manage the customs clearance and the process of collecting the VAT from customers when they deliver the products in the UK.
“This additional cost will either have to be passed on to our customers or we will have to take a large impact on our margins which most likely would not be sustainable.”
For now, Ian and Alison will continue shipping to the UK, but many other businesses have stopped deliveries between the UK and EU, on either a temporary or permanent basis. As well as small businesses this includes big names like John Lewis and Fortnum & Mason.
Ian said: “Right now we are going to have to adjust our shipping rates as we cannot take on all of the costs that have resulted in the red tape that Brexit is creating.
“We will try to keep shipping if only to test the system and see what happens to each order / what we really get charged / how it works for our UK customers when they receive the packages etc. Is it feasible in the long term? Well, only time will tell.”