Used watch sales in Europe ‘have fallen to zero’ since the Brexit deal killed the margin system
One of Britain’s most respected used and vintage watch companies says sales in Europe have “fallen to zero” since January 1, when the post-Brexit trade deal was enacted.
Justin Koullapis, Director of Watch Club, said WatchPro that trade to the EU is now hit by a double whammy the margin regime being abolished in the United Kingdom and shipments are delayed as customs officials are overwhelmed by new rules that push them to stop packages containing valuable goods.
Watch Club has had a Mayfair store in The Royal Arcade, just off Bond Street, since 1996 and operates online.
Eddie Bloom, director of London-based Bloombar Watches, says his company faces the same issues.
“Big problem!” he said in a comment on WatchProlast week’s story on the subject.
Not only are second-hand watches becoming more expensive for EU customers, most are unaware of the change in VAT rules, leading to confusion and anger.
“The problem is not only that we UK dealers can no longer sell in the EU, but also the large number of buyers in the EU who do not realize that the rules have changed and continue. to buy watches from us on a daily basis, only to cancel the order when they find out that import VAT is due, ”Bloom said.
The problem for second-hand specialists like Watch Club and Bloombar Watches is the UK’s withdrawal from the European Union Margin Scheme, which allows any EU-based business to pay sales taxes, such as than our 20% VAT, on the only profit margin of an exchange (sale price minus cost price) rather than on the total price paid for a second-hand watch.
Until December 31, if a UK company bought a used Rolex Submariner for £ 10,000 and sold it for £ 15,000, VAT would only be applied to the profit of £ 5,000, resulting in a tax bill of 1,000. £.
As of January 1, the UK is no longer included in the margin system, so the same watch sold for £ 15,000 would now have £ 3,000 in VAT added.
Since the remaining 27 EU member states still offer the margin system, this means that a customer buying the aforementioned Rolex from an EU-based trader will pay £ 16,000 for the watch, but a company based in the UK selling to an EU based company the customer will need to charge £ 18,000.
The loss of the margin program is a second blow to the UK luxury watch industry since the start of the year.
January 1 was also the date the Treasury withdrew the VAT refund scheme that allowed foreign visitors to immediately reclaim VAT on high-value goods like luxury watches.
This is expected to impact spending in this country for wealthy visitors from outside the EU who will now be able to immediately reclaim VAT at tourist hot spots like Paris and Berlin, but not in the UK.
The problem was seen as so serious that it was mentioned as an obstacle in the financial guidelines of The Watches of Switzerland group.
Managing Director Brian Duffy wrote in a recent financial update: “We believe the UK government has misjudged the impact of the removal of duty free shopping for tourists and we will continue to support all efforts to change this.”
A petition has been filed with Parliament calling on the government to restore duty free sales at airports and the retail VAT export regime.
The petition has currently been signed by 12,492 people. Click here to add your name.