Deliveries NASTY with a bill from Europe

How more and more shoppers are being hit by hidden import fees — even if they think they’re buying British

FOR consumers, it’s one of the body blows of Brexit. Since Britain left the EU, tens of thousands of shoppers have been hit by a raft of unexpected extra charges when buying goods from websites based in Europe.

In some cases, there have been demands of nearly a half as much again on top of the asking price before couriers would hand over the goods.

Not only are these being imposed when consumers were promised a tariff-free future — but many of the shoppers had no idea that the websites were based overseas, and were never warned at the check-out that they would have to pay more.

To make matters worse, the retailers often don’t understand what charges they should apply under the new post-Brexit rules — some are rigorous in demanding the extra costs, while others don’t bother and still more are charging far more than they should, often unwittingly.

So what exactly is behind these additional bills? Here, we explain the complicated mix of VAT, customs and delivery charges, which has left shoppers baffled, angry and often without their shopping...

THE VAT BOMBSHELL

SOME of the extra charges come in the form of a VAT bill, to be paid on delivery of the goods.

Before we left the EU, a British internet shopper buying, say, a shirt from Spain, would be quoted a price that included 20 pc VAT and the retailer would pass on that VAT to the Spanish treasury. Likewise, Spaniards buying British goods on the internet would be charged VAT by the retailer who passed it on to HMRC.

Now we have left the EU, UK shoppers are expected to pay the VAT themselves on many goods from EU websites — and retailers should not be including VAT in the price on the site for those goods.

‘The sales are now treated as exports,’ says Michelle Dale, a VAT specialist at the accountancy firm UHY Hacker Young.

‘They incur no taxes in Spain. But when they arrive in the UK there will be “import VAT” to pay to HMRC.’

But it is more complicated than that. For products from the

EU worth less than £135, the EU retailer should be levying the VAT from the customer and passing it on to the HMRC, which means there should be no extra charge on delivery.

For goods worth £135 or above, the VAT should be paid in Britain by the customer on delivery.

However, while larger firms

have registered with HMRC and will collect the VAT on behalf of the British customer, many smaller companies haven’t done the paperwork, or think it is too much hassle to register with HMRC.

It means it’s a lottery as to whether you are charged VAT by couriers and on what value products. Often, customers are being charged twice — both at the point of sale and on delivery.

CLOBBERED BY CUSTOMS DUTY

THAT arbitrary figure of £135 is also the value at which customs duty becomes liable post-Brexit and it will have to be paid on delivery as well as any VAT.

The duty level depends on what the item is, but it ranges from about 2 pc up to 25 pc of the value of the product, with most fashion items incurring about 10 pc to 12 pc.

This duty has to be paid by the UK shopper, not the EU shop. Delays are also leading to cancellations.

Anthony Bale, 46, an academic from South London, bought some sportswear online for £116 on January 6 from Spanish brand Joma.

Using the ‘track my order’ function, however, Anthony could see that his parcel was still sitting at Madrid airport until February 5.

Anthony then got an update to say the parcel had been sent back to Joma.

A further week later, the sportswear company emailed him with an explanation: ‘We have to cancel your order, as we are having logistical issue and delayed in custom [sic] as a result of Brexit.’

Anthony was later refunded by the company.

HIT BY HANDLING CHARGES

HOW does the UK shopper physically pay all this extra VAT or duty? ‘It is up to the carrier, such as DPD or UPS to pay the import charges and collect them from the shopper before delivering the goods, but they will also levy a handling charge for doing this,’ says Dale.

DHL, for instance, charges 2.5 pc of the liable VAT and duty with a minimum fee of £11, while Royal Mail charges £8.

PENALISED ON PRESENTS

TO MAKE matters worse, goods sent from abroad incur VAT if they are valued above £39. Again, the recipient has to pay it, not the sender. If they are above £135 in value, they will also incur a customs duty of 2.5 pc of the goods value.

WHAT ABOUT AMAZON OR EBAY?

AMAZON, eBay, Etsy and other online marketplaces are now liable for paying VAT and duty on shoppers’ behalf under new laws that came into force coincidentally at the end of the transition period on January 1.

So shoppers buying on these platforms should not be hit by unexpected charges — extra costs should be taken at the point of purchase.

But customers are still reporting problems.

Simon Grice, 60, a car mechanic from Sheffield, bought a 1970s Sicura watch from a Spanish watch dealer on eBay in early January. It cost £177, plus £15 postage and packaging.

But a week after paying via PayPal, he got an email from shipping firm UPS demanding a further £48 in import duties and VAT for the item to be released from Spanish customs.

Simon paid the fees, but the watch took another couple of weeks to arrive.

‘From what I understood, Brexit was going to involve frictionless trade and I’d get any item within a week,’ says Simon.

‘I might get a small import charge, but I certainly didn’t expect it to take four weeks and cost nearly £50 extra. I won’t be shopping from Europe again.’

BRITAIN now has the tricky task of striking a trade deal with China without turning a blind eye to the powerful nation’s dire human rights record. The Asian superpower is never far from controversy and is even considered a security threat to the UK economy.

But where does this leave investors trading in China? Can you afford to ignore Chinese stocks?

Most investors have certainly not been put off. Industry figures show that money poured in to China funds as the West struggled with the pandemic last year.

Although China was where the virus originated, it’s government’s quick and strict response meant it was the first nation to emerge out of lockdown.

As a result, it was the only major global economy to avoid a contraction last year, recording a 2.3 pc rise in GDP.

Janet Mui, investment director at wealth manager Brewin Dolphin, says: ‘The pandemic has given China an opportunity for a head start on the rest of the world in terms of growth. There is the potential for this to continue in the coming years.’

The nation last month marked the Chinese New Year. The Year of the Ox denotes hard work, positivity and honesty, according to Chinese astrology.

AND there is plenty to be positive about when it comes to the country’s economy. China’s swift recovery and development of its technology industry has helped its stock market (the CSI 300 index) rise 37 pc since March 2020. The index has fallen 3pc so far this year. Chinese consumers also have tremendous spending power.

The proportion of income saved by households in China averaged at 38.2 pc in 2019, compared to 6.5 pc in the UK. This means Chinese households are resilient to economic shock or immediate threats to employment or income.

And due to travel restrictions there has probably never been so many Chinese people spending their time on home soil.

Dzmitry Lipski, head of funds research at Interactive Investor, says: ‘The rise of the Chinese consumer is a huge growth theme which is still very much intact despite the pandemic. It could cost investors who avoid China over the long term. It’s the world’s second largest economy, after all.’

But there are unavoidable ethical concerns. China has faced international condemnation for human rights abuses — including the treatment of minority groups such as Uighur Muslims held in detention camps.

Yet Mr Lipski says the future could be different. He points out that China last year announced that it aims for ‘carbon neutrality’ by 2060, and adds: ‘China could hold the keys to tackling global climate change.’

Many investors are also attracted by innovation in Chinese industries such as automation, healthcare, and e-commerce.

The Investment Association, the trade body for the funds industry, says after withdrawing £87 million from China funds in the first quarter of 2020, investors put in £700 million over the next nine months. Interactive Investor says it’s seen more customers turn to China since October as the West has continued to battle the virus.

Susannah Streeter, senior investment and markets analyst at investment service Hargreaves Lansdown, says that in February around 85 pc of all trades in China funds were buys.

She says: ‘We are seeing continued enthusiasm for Chinese assets, with the number of buys of Chinafocused funds far outstripping sells. Investors’ confidence in the Asia-Pacific region is still riding high with other regions paler in popularity, and confidence in Europe dropping in February.’

A number of Chinese businesses have caught the eye of investors and fund managers. A shift in the amount of people shopping online and relying on technology to complete daily tasks, means that tech giants Alibaba and Tencent are in demand for daily shopping and entertainment needs.

Their share prices have risen 21 pc and 80 pc in the last year, respectively. These are a musthave, it seems, for fund managers investing in Asia, who typically hold them in their top ten holdings.

Among other popular names is e-commerce platform Pinduoduo. Its share price more than quadrupled last year when it launched a service allowing neighbours to club together and bulk-buy food.

Meituan, another internet business, allows Chinese consumers to order whatever they want from a single app, from hair appointments and cinema tickets to food deliveries and tradesman. Its share price has soared by 302 pc in 12 months.

Savers who don’t want to risk investing directly in companies can let the professionals take care of stock selection and gain exposure through some of the best-known funds in the market.

Darius McDermott, of FundCalibre, says: ‘We like active funds where managers can use their shareholder votes to engage with companies to improve ethics — or simply avoid them.’

He tips Fidelity China Special Situations which holds a large number of stocks (around 130) including technology giants Tencent and Alibaba in its top 10 biggest investments.

The trust has turned a £10,000 investment five years ago into £33,100 and currently holds almost £3 billion of UK savers’ money.

He also likes Invesco China Equity for its ‘excellent stock-picking track record’. It has turned £10,000 into £23,000 in five years.

Brewin Dolphin’s Ms Mui tips Fidelity Asian Values which focuses on finding fledgling companies before they become household names. It has turned £10,000 into £17,700 over five years.