Brexit and the future of Oakley Sound

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Synthbuilder
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Brexit and the future of Oakley Sound

Post by Synthbuilder » Thu Oct 22, 2020 7:34 am

I have no real idea of what will happen at the end of this year. I've just been to the government's online help pages and, to be honest, I'm not any the wiser. The basic gist of the information was 'get professional help, it's really complex'. Ultimately, with a no deal looking increasingly likely, the final outcome is that buying PCBs from Oakley Sound will be become either more costly, take longer, both of the above, or impossible.

Currently the UK trades as part of the EU and because of that we have deals with most of the rest of the world. Which includes the US and Canada. As of 1st January 2021 that all ends and new trade deals will need to be struck. While those are being negotiated (and they take years) we will abide by WTO rules. Whatever that means in practice for a small company selling PCBs whose average order value is around 40GBP I have no idea.

There are several options for me:

1) Do nothing and see what happens. I'm guessing that EU customers will, after a short period, start getting those wonderful little notes from the courier or postal service that your order is currently being held in customs awaiting VAT and a fee to be paid. That may even happen to US and Canadian customers - once again I have no idea.

2) Get VAT registered and set up the various mechanisms in place to allow me to trade with destinations outside the UK. This could be easier than I am currently thinking it will be. But probably not. Although this is my job, it's more of a hobby really. I don't make enough money from this to make significant amount of extra work viable.

3) Find someone else to sell my PCBs.

4) Give up and play more music. My mother tells me I ought to write a number one song. Perhaps I should try that.

Tony

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Re: Brexit and the future of Oakley Sound

Post by BugBrand » Thu Oct 22, 2020 7:45 am

I hear you, Tony. It is hard to get clarity for small players - both in terms of general lack of clarity, alongside the fact that we don't tend to have funds to pay for lots of professional help.

VAT/EORI has been flagged up a few times - I'd suggest if you can avoid VAT registration then do! Presuming you're under the mandatory threshold.

It'll be interesting to see how small transactions/shipments change - saw a somewhat worrying note today about small items but remains to be seen quite how it pans out. Quite a lot flies under the radar at the moment & I'm not sure I'd give UK credit to tighten such things up effectively anytime soon!

One area I wonder on is whether effective prices will change or not - I mean, I won't have to charge VAT on sales to EU countries, so that's a saving for buyers, but then they'll probably/possibly be charged import - so maybe little difference unless, as you note, brokerage fees are added!

Sidestepping the quagmire of feelings on Europe, the uncertainty I note is that we still do not know the framework we'll be working with - once that becomes clearer we can all figure how we'll work going forwards. If you don't know the rules (because they haven't been written!) then you can't play the game!

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Re: Brexit and the future of Oakley Sound

Post by Lux A Turner » Thu Oct 22, 2020 1:25 pm

BugBrand wrote:
Thu Oct 22, 2020 7:45 am
I'd suggest if you can avoid VAT registration then do! Presuming you're under the mandatory threshold.
Agreed. If you register for VAT then you'll have to charge it - including to your UK customers - either by adding it to your prices or taking a hit on your margins. You'll also have to administer it and submit a quarterly VAT return.

The VAT threshold is being / has just been reduced to zero by all EU member states (and the UK) - so VAT will have to be paid on everything from outside the EU from now on - even items worth less than £15.

Dealing with European countries isn't getting any easier for the small trader. Germany (for example) has started enforcing its packaging regulations more tightly of late. That's where you're supposed to register with an agency in Germany and pay an annual fee, if you're sending so much as a single, commercial package to that country. OK, it's only 9 Euro for small operators at the moment - but how long will it be before the other 25 remaining EU members introduce something similar and how long will it be 9 Euro?


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Re: Brexit and the future of Oakley Sound

Post by kdjupdal » Thu Oct 22, 2020 2:08 pm

I have bought a number of PCBs and had them sent to Norway. Norway isn't in the EU but has the EEA agreement with EU. For the time being Norwegian customs don't charge VAT on orders less than 350NOK, but in theory they should. For larger orders I pay VAT + a handling fee (= a fee for allowing me to pay a fee, kind of annoying).

I don't see that anything would change for sales to Norway, unless they decide to put customs duties on consumer electronics, in addition to the VAT. For the EU countries things will of course change.

I suggest number 1, maybe in addition to making more music. ;)

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Re: Brexit and the future of Oakley Sound

Post by terjewinther » Fri Oct 23, 2020 1:34 am

Dear Tony,

I have been buying, building and using your PCBs and modules for a long time now. I live in Norway, which is in Europe, but outside of the EU. This means that for all these years I have paid import VAT and fees. I still do it. Even though the import VAT in Norway is high; 25%. (Although I have to admit that sometimes the small, flat parcels from Oakley Sound did go through customs without any fees, because it just looked like a letter.)

Up until recently Norway had a low limit of 20 GBP for import tax, so very small items under this value limit could go through customs without any import VAT. Now that lower limit has been removed, so in theory everything imported to Norway should pay VAT. However; I still receive very small parcels - including shipments from Oakley Sound and other small parcels like a tiny bag of transistors - without paying VAT. This is because the Norwegian government (or more likely the Norwegian postal services) are working on a solution where normal people themselves can do the import VAT payment without large government fees (which are often like 25 GBP). While doing so, I believe they just let small parcel slip through, otherwise custom service storage would be enormous! I believe this will be more and more common, as online sales are increasing: easy import solutions for common people. The input from others to "avoid VAT registration then do! Presuming you're under the mandatory threshold." is a very good advice. It is probably a new situation for people in EU and USA/Canada, but it is an easy solvable situation. The first time you have to fill out a tiny form it feels strange, but then it quickly turn into a habit.

If there is a change in pricing, shipment costs and/or import tax/fees, we will quickly learn the most effective way to combine orders. Is it best for me to buy a single module at a time, combine 3-4 modules, or do larger collective order together with friends and others? People find solutions.

Continue to make and sell PCBs and modules. The music needs it. Do not worry about the costs. We will buy them anyway.
New people coming into building will get it. This list will help them getting through.
New people getting into synthesizers that do not want to build themselves can buy readymade modules, and this can of course be done through others, like Krisp.


Terje Winther
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Re: Brexit and the future of Oakley Sound

Post by kdjupdal » Fri Oct 23, 2020 3:48 am

I am guessing the sales to Norway - which are probably mostly Terje and me - are not a big part of Tony's international sales. I didn't know that even US and Canadian customers enjoy tax free purchase from UK. Certainly customers there will be bothered by the hassle of VAT and increased cost, since they are not used to this. Maybe the best longterm solution would be to license PCB sales to someone else.

The popularity of modular synthesizers has surged in the last 10 years, but it seems the DIY building of modules has not increased that much? I think most people haven't got the time or patience to build and it is much more affordable for many to buy a finished synth these days.

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Re: Brexit and the future of Oakley Sound

Post by Synthacon » Fri Oct 23, 2020 3:56 am

Your mum is very wise my friend.

I think to be 2 and a bit months away and to be none the wiser is incredibly frightening.
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Re: Brexit and the future of Oakley Sound

Post by Mr.Kus » Fri Oct 23, 2020 4:31 am

BugBrand wrote:
Thu Oct 22, 2020 7:45 am
One area I wonder on is whether effective prices will change or not - I mean, I won't have to charge VAT on sales to EU countries, so that's a saving for buyers, but then they'll probably/possibly be charged import - so maybe little difference unless, as you note, brokerage fees are added!
In Finland, and I assume most other EU countries as well, customer always needs to pay VAT. If the seller operates in EU tax area, seller will charge it, otherwise it's charged separately. On top of that there's also a smaller customs/imports fee, for imports outside of EU. There is some threshold for customs fee, under which it's not charged. VAT is calculated from combined price of the product and postage.

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Re: Brexit and the future of Oakley Sound

Post by werock » Fri Oct 23, 2020 4:58 am

I would guess the onus will fall on the buyers, same as it is now if I buy something from the US, it's down to me to pay the vat etc if it gets caught by customs. You'd probably have to attach a customs form to the parcels you send to an EU country.

However, despite the hysterics of the media and public declarations by the idiot politicians, the betting markets are still giving a >70% chance of a deal before the end of the year, so all is not lost.

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Re: Brexit and the future of Oakley Sound

Post by waldenpotato » Fri Oct 23, 2020 8:58 am

I would be bummed to not be able to buy Tony’s boards. I only started building them a few months ago. I’d love to be able to see the new designs come out.

If anything maybe I should just buy a bundle before the end of the next month.

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Re: Brexit and the future of Oakley Sound

Post by Synthbuilder » Mon Oct 26, 2020 4:37 am

My thanks for everyone's thoughts on this matter. For the moment I will continue on as normal.

However, it may be prudent that if you do want something and you live in the EU, then maybe now is the time to order.

Tony

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Re: Brexit and the future of Oakley Sound

Post by Schlumpfhut » Mon Oct 26, 2020 5:45 am

Synthbuilder wrote:
Mon Oct 26, 2020 4:37 am
However, it may be prudent that if you do want something and you live in the EU, then maybe now is the time to order.
Already done ;)
After spending quite a lot of money i must compliment you on great communication, fast delivery and (again) excellent quality.
Can't wait to start building but first i need to get more stuff out of the UK before i qould have to pay VAT and import fees.

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Re: Brexit and the future of Oakley Sound

Post by Prunesquallor » Sat Oct 31, 2020 3:09 am

I live in Spain and the deal is that if an order from outside the EU is below 150 Euros, including postage, then it won't get stung with extra costs. This sounds similar to what happens in Norway, judging from the posts above. PCBs should therefore slip under the radar.
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Re: Brexit and the future of Oakley Sound

Post by nangu » Sat Oct 31, 2020 3:21 am

USA doesn’t charge import duty for anything under $800, so there shouldn’t be any changes here.

Things are probably going to sit in customs for a month, but that’s been the situation for quite awhile.

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Re: Brexit and the future of Oakley Sound

Post by Muff McMuff » Sat Oct 31, 2020 3:51 am

Maybe push sales from now until the end of the year. Promotions, black friday, pre christmas sale whatever whilst the frictionless trade exists. Take a step back when the early January chaos and red tape comes into effect and hopefully smooths out as the month or months go on. My understanding is the form filling and documentation is guaranteed. The deal or no deal is basically over how much tax the EU will apply to British products and how much tax the UK will apply to EU stuff coming in. Even a "deal" will be bare bones minimum and more comprehensive deal will be negotiated in the years to come.

USA could in theory become easier and be more like what buying and selling in the EU is today depending what deal is struck. That would be a benefit of brexit. Its funny that negative things of brexit are obvious and many but the promised "brexit dividend" is much harder to quantify. Even keen brexiters can't reel off the benefits other than "we will prosper mightily" and other guff.

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Re: Brexit and the future of Oakley Sound

Post by rvlt » Mon Jan 04, 2021 7:48 pm

Just wanted to share my first post-Brexit experience, maybe it's of some interest:

I bought a broken tape echo from a private seller on ebay UK last Sunday. Price incl. shipping was around 155,- Euros. It was sent out yesterday, and today I got a message from UPS saying I have to pay another 47,- Euros (for import tax and handling fee).

Didn't expect that, i thought with this last minute Brexit deal before Christmas it's gonna be the same as before, more or less. But that's quite a substantial increase of the original cost. Seems like buying from the UK (for EU citizens) is now the same added cost as buying from the US or Japan, afaik.

Having said that, this won't stop me from buying Pcbs from Tony in the future, of course.

Happy new year to everyone
Lars

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Re: Brexit and the future of Oakley Sound

Post by Leverkusen » Tue Jan 05, 2021 2:26 am

You probably payed import VAT not tax. The last minute "deal" was only about taxes, but that probably did not matter here because the value is too low.

VAT is to add on all goods in the EU. We tend to not think about it as it is automatically added to everything we buy. When you buy something from anywhere beyond the EU the same VAT is added at import. It is around 20 % of the value plus shipping, which would be 31 EUR.

UPS add their handing fee for doing all the official import stuff for you. Same with DHL Express and FedEx. Usually they have no change on delivery so you need to have the amount precalculated or pick tit up in some of their offices, which are not the small access point they have all over the town in small shops. DHL express are located in a business park on the other end of town that is impossible to reach without a car.

Otherwise you would have to pick the shipment up at the authorities and pay VAT there. Here in Hamburg they also open the parcel then. I have to tell them what it is and bring any kind of proof for how much I payed, like a printed paypal receipt with the name of the sender and the name of the device. Plus it usually takes some weeks longe to get it. There are always people slowing down things by claiming that it is present from their auntie and that they don't need to pay VAT because they did not pay for it, which is not how it works. The whole process takes about 30 to 60 minutes. At least it is in the centre of the town, where I live.

Up to a certain value things will not be checked properly and I have to pick it up at the post office and pay VAT there. That value is something around 120 EUR in germany, below 20 EUR or so no VAT is added.

I generally prefer to pick it up by myself and save the handling fee. When it is delivered by DHL/Post I get a note from them and can chose if I want to pay them for doing the handling for me.

Of course all this would not keep me from ordering PCB's from Tony either. I would expect the prices to be recalculated without VAT for export as it is done the other way round.

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Re: Brexit and the future of Oakley Sound

Post by Synthbuilder » Tue Jan 05, 2021 4:17 am

Leverkusen wrote:
Tue Jan 05, 2021 2:26 am
I would expect the prices to be recalculated without VAT for export as it is done the other way round.
There is no VAT applied on any products I sell. This is because I am not VAT registered. That means that I do not have to charge my customers VAT. UK businesses do not have to register for VAT if their turnover is below 85,000GBP.

Before Brexit the UK was part of the EU and, as such, there were no trade borders between us. Now there is. Large companies can take advantage of the EU/UK trade deal recently negotiated and the new trade border will not affect them that much. There's more paperwork but they'll have systems in place to handle it.

For small businesses, and especially those who are not VAT registered, and individuals such as Ebay sellers, the impact of a border will be significant. EU buyers will now have to pay VAT and a brokerage fee that will be collected by the postal service or the courier company. There may even be a small duty to pay as well. On the front of the parcel I send will be a filled in CN22 form that states the value of the goods so the correct VAT (and duty) will be applied.

If I become VAT registered then I can apply VAT to my prices for those customers in the EU. I would then pay VAT to the various countries on the customers behalf. The CN22 form will have a suitable code filled in to make sure they are not charged additional VAT and brokerage fees by the postal service or the courier company. I'm not sure about duty. However, becoming VAT registered and applying for VAT accounts in every EU country I send to, is an onerous and costly change.

Whether I become VAT registered or not, all EU customers will now have to pay VAT. Which is roughly 20% on top of what you were paying before Brexit. Now I could drop my prices by 20% to maintain my prices for EU customers, but that cuts heavily into my margins.

What I think may happen is that the online marketplaces like Etsy and Ebay will start to provide customised VAT collection services much like Bandcamp does. I think Ebay already does so via its Global Shipping Program but I've not seen anything for UK sellers yet. If this does happen I may well take advantage of these schemes.

Tony

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Re: Brexit and the future of Oakley Sound

Post by Leverkusen » Tue Jan 05, 2021 5:32 am

Ah, I see - that's an unfortunate downside of being not forced into VAT beyond a threshhold. I understand that you don't want to get into this hassle. Also I wanted to clarify that I did not mean "expecting prices to be recalculated" in a demanding way but more in how I generally expect things to come now. Still, import VAT does not hold me back from purchasing PCBs from the US so it shall not hold me back to order from the UK. Maybe there is a way to reduce the shipping costs in a way that ordering single PCB's would stay beyond the VAT treshhold? Some US shops are a bit sloppy with calculating the value they write on the custom form when PCB's can be sent as a a small padded letter. I would not expect or ask anyone to do so but I am always happy when it works.

After all - it is not that much money in the end that is added to the complete costs of building a modular synth and keeping you in business and in the postion to develop great instruments is more important in the grand scheme of things.

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Re: Brexit and the future of Oakley Sound

Post by adam » Tue Jan 05, 2021 5:36 am

the small package exemption continues until july 1st, so small orders will still be free from vat

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Re: Brexit and the future of Oakley Sound

Post by Synthbuilder » Tue Jan 05, 2021 5:50 am

adam wrote:
Tue Jan 05, 2021 5:36 am
the small package exemption continues until july 1st, so small orders will still be free from vat
It's only 22 euros though and I think it includes the price of the postage. But either way, it's a not a big value and most of my customers' orders will be more than that.

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Re: Brexit and the future of Oakley Sound

Post by Synthbuilder » Tue Jan 05, 2021 5:57 am

Leverkusen wrote:
Tue Jan 05, 2021 5:32 am
Maybe there is a way to reduce the shipping costs in a way that ordering single PCB's would stay beyond the VAT treshhold?
Sadly it's only 22 euros and Adam says it will end in July.

The EU and the UK are trying to stop the large volume of goods coming in from the Far East which sneak past border scrutiny without paying any or sufficient VAT. At some point we could well see enforced usage of the EU's ‘Import One Stop Shop’ (IOSS) for importing into the EU, and HMRC's OSS for importing into the UK. Other trade blocks will possibly follow the 'one stop shop' system if it proves successful (ie. profitable).

All of this won't bother the likes of Amazon and other big businesses.

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Re: Brexit and the future of Oakley Sound

Post by BugBrand » Tue Jan 05, 2021 6:16 am

Synthbuilder wrote:
Tue Jan 05, 2021 4:17 am

If I become VAT registered then I can apply VAT to my prices for those customers in the EU. I would then pay VAT to the various countries on the customers behalf. The CN22 form will have a suitable code filled in to make sure they are not charged additional VAT and brokerage fees by the postal service or the courier company. I'm not sure about duty. However, becoming VAT registered and applying for VAT accounts in every EU country I send to, is an onerous and costly change.
Hi Tony,
I'm not entirely sure you're right there - as far as I've picked up I (as a VAT registered company) now do not charge VAT except on UK sales.
But now you got me a bit worried & needing to check this again!

10 years down the line, VAT registration hasn't been too bad for me - in some ways it is good to have to do quarterly accounts (keeps it more manageable than once a year) and once you've figured the ways it was relatively painless doing the EU VAT submissions - but the transition over to it all was definitely a major task & something I think most small scalers would be cautious of. Hard to say whether having to add VAT lost me some sales - quite possibly - so much of my stuff goes over to the States, it seems, for the last several years.

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Re: Brexit and the future of Oakley Sound

Post by Synthbuilder » Tue Jan 05, 2021 9:30 am

BugBrand wrote:
Tue Jan 05, 2021 6:16 am
I'm not entirely sure you're right there - as far as I've picked up I (as a VAT registered company) now do not charge VAT except on UK sales.
This is correct. However, the EU want you to use their Import One Stop Shop from July of this year if the order value comes to less than 150 Euro. It would have been earlier but the pandemic put paid to that. HMRC, on the other hand, have already started their One Stop Shop for all overseas suppliers to the UK. The limit in this case being 135GBP. With orders above 150EUR or 135GBP VAT can be handled by the courier and postal services. Google 'IOSS' for news of the impending change.

As far I can see using the OSS or IOSS will not be mandatory as yet. I mean how do they cope with non business mail? But I guess the idea is that they figure that customers won't want the brokerage fee on top of the VAT and using the OSS service will stop that.
10 years down the line, VAT registration hasn't been too bad for me.
I have been thinking about it. It certainly would mean that purchases would be cheaper.

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Re: Brexit and the future of Oakley Sound

Post by BugBrand » Tue Jan 05, 2021 10:34 am

Ah, thanks Tony - I had completely failed to hear of those before.. yikes!

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