January 04, 2021 0 Comments
Brexit is a deeply uncertain time for many small businesses, and you may be wondering how it will affect our business and our customers. Our founder Ysolda outlines the issues we're currently aware of.
I'm deeply saddened to be leaving the EU and want to reassure our European customers that we’ll do everything we can to continue supplying your projects, and more importantly to make sure that you continue to be part of our community. I hope you’ll understand that we don’t quite know how everything will work out, for our EU customers, or our business as a whole, given the down to the wire negotiations. Despite the increasingly frequent emails from HMRC telling us to get ready, guidance on many common scenarios simply isn't available yet.
Supporting the many other small businesses that we work with is at the heart of what we do, and I’m thinking, as I write this, about all of you who are having to make difficult decisions and who are facing huge uncertainty about the future of your business.
In the short term we expect major delays to parcel delivery, as we’ve already seen over the last couple of weeks, and that there may be periods where we’re not able to take orders for physical goods. We’ve stocked up as much as our cashflow, and suppliers stock levels, would allow, but we also expect that there will be delays on our incoming stock. Unfortunately some of those "stocking up" orders were caught up in the border closing before Christmas, and we're now not sure when we'll receive them.
Vat for EU customers
As you may be aware VAT, until December 31st, was charged to our EU customers at the UK rate. If you are in the EU your parcels would arrive without having to go through customs and without additional charges. This will no longer be the case and you may find that your parcels are delayed, and that VAT and other fees have to be paid before you receive them. This is a temporary situation, but I know it's a frustrating one. There is currently no guidance on what we should do with orders that were placed before December 31st, but we're following our accountant's advice, looking for official guidance and will do everything we can to make sure you aren't charged twice. If you fall into this category, particularly for the Colourwork Club, we may need to get in touch with you personally.
In terms of our pricing you may see some changes but we’re not quite sure what our final solution will be. At the moment our ecommerce platform (shopify) does not have a built in or robust option to both show a VAT inclusive price to our UK customers and a VAT exclusive price to our non-UK customers, or to deduct VAT at checkout. VAT is also more complex than sales tax: although the receipt will show 20% VAT on UK, and until recently, on EU orders, we’re able to reclaim a large portion of the VAT we pay on goods we purchase. Consequently net VAT we pay on our sales is lower than 20% of our Vat-able sales. We also use the fact that we make a bit less profit on a product sold to someone in the UK to hugely subsidise our shipping costs. Consequently everyone in the world pays the same prices for our products and you won’t be too shocked by the shipping cost at checkout (shipping is expensive!). In the short term we’re most likely to continue this approach so where, as an EU customer, you will see savings, will be in the shipping costs. However you might find that your parcels do go through customs and incur extra costs.
Fortunately this is likely to be a short term problem. The EU, unrelated to Brexit, is bringing in new rules on VAT which mean that when you purchase something under a certain value (the proposed cap is currently €150) from outside of your country that you’ll pay the VAT rate for where you live. You’ll then receive your parcel without having to pay any extra VAT or fees. You might have seen this happen on knitting patterns, or online courses, as this has been the rule for digital services for a few years. It sounds a bit complicated, and keeping track of lots of different VAT rates is a pain, but I’m actually sad it’s been pushed back from the original 2020 rollout to July 2021. Unfortunately until the new system comes into place the only way we’d be able to prevent our EU customers from paying extra fees when their parcels arrive is to register for VAT in every individual country. We did look into this but it’s very complicated and expensive and simply isn’t feasible except for much larger businesses.
The above system has been in place for digital services (including patterns and ebooks) for several years, so you won't see any changes to these. It's possible in the future that we will set all of our prices to VAT exclusive, and at that point patterns might have VAT added on at checkout, but we haven't made a decision on that for now.
For customers outside of the EU
We've had a few enquiries from customers outside of the EU worried about having to pay customs duties on our parcels when they previously didn't. Our understanding is that you shouldn't see any changes, but the best option, if you're not sure, is to check on your own government's website for things like what the charges might be or what the limits on a parcel's value are. Unfortunately we can't be held liable for any customs charges and associated fees.
So that’s where we are, hoping to weather the storms that 2021 will bring, and to continue to bring you materials, inspiration and community to fuel your making, wherever you are in the world. Thank you for bearing with us as we iron out the details.
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