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Business Services  •  Business Tax  •  VAT

Get your VAT ‘Brexit ready’!

By RJP LLP on 27 October 2020

You’ve probably seen the TV advertising campaign urging us to ‘get Brexit-ready’! But what does getting ‘Brexit-ready’ entail when it comes to VAT?

Firstly, if you are based in Northern Ireland there are different rules for you than there are for businesses based in Great Britain; these are not covered by this article, but if you need more information here is a link:

https://www.revenue.ie/en/customs-traders-and-agents/brexit/information-for-businesses-trading-with-ni/trade-with-ni-vat-issues/index.aspx

For businesses based in Great Britain, below are things to think about sooner rather than later in relation to VAT:

  1. Do you deal with movements of goods from and to EU Member States.

If you haven’t got one already, you will need a UK EORI number. This is your personal identification number that will go on Customs paperwork. Don’t panic if you haven’t got one yet because there is still time but make sure you move it up your priority list because it is vital to have one!

You may also need a European EORI number too. The Netherlands is one of only a couple of Member States who are giving the numbers out prior to 31 December. These will automatically be activated from 01.01.21.

If you need a European EORI number get in contact and we can help. Also get in contact if you are not sure whether you need a European EORI or not!

  1. EC Sales Lists!

Be they be for the export of goods or the supply of services ECSLs will no longer be required after 31 December 2020.

You will have until 21 January 2021 to submit ECSLs for sales made before 1 January 2021.

  1. Intrastat

Businesses importing goods (arrivals) into GB from the EU will still be expected to prepare monthly Intrastat reports if the £1.5m reporting threshold is exceeded. This will only apply for 2021. In 2022 this requirement will go.

The reason for this is that HMRC needs to track import data. This is because the UK will allow importers to defer import customs declaration between 1 January and 30 June 2021, so continuing Intrastat submission for this period is essential so the UK can monitor imports.

Businesses exporting goods (dispatches) to the EU will no longer be obliged to prepare Intrastat after 31 December 2020.

Businesses in Northern Ireland will be required to complete Intrastat as normal until at least 2025!

  1. Export of goods

Who is the exporter of record and responsible for the UK customs paperwork and export clearance, transport, insurance and other issues relating to the goods movement? This is normally contained with the in the International Commercial Terms (Incoterms) agreed in the sales contract. Typically, it will be you as the GB supplier.

To make it easier for your customer, you may also wish to take responsibility of the customs clearance and import VAT for the goods into the EU too and sell under DDP terms (Duty Deliver Paid) in which case you may well need a European EORI number as per above!

Who is going to complete the export declarations? Do you have this expertise in house? You are able to purchase commercial declarations software to help you with this task but do you want the hassle? If the answer to that question is no then you will need to appoint an intermediary to assist with this such as a freight forwarder, Customs agent or a fast parcel operator. Speak to them sooner rather than later!

  1. Imports

There are similar questions to ask yourself for importing as there are for exporting…

Who will be the importer of record? Who is going to complete the import declarations?

The UK is allowing importers to defer the completion of Customs declarations and the payment of tariffs for most imports until 1 July 2021.

Postponed accounting will be introduced which means that all import VAT will be payable on the UK VAT return regardless of where in the world the goods have come from. This means the VAT return will be changing but at the time of writing we don’t have any details as to how it will be changing!

Whichever route you take, you must ensure you retain evidence of the import VAT paid so you can recover it from HMRC.

C79s will no longer be needed to claim import VAT but you will need other proof of payment of import VAT to show any visiting VAT inspector.

Finally remember HMRC confirmed last year that it is only the owner of the goods themselves who can claim import VAT back (unless you act as undisclosed agent).

  1. Commodity codes

You will need commodity codes for your goods both for import and export purposes. The commodity code may dictate the amount of duties payable. Therefore, it is imperative to check to make sure you have the correct commodity code because if you don’t this could result in either an under or overpayment of duties!

  1. Import of services

Reverse charge will still apply on purchase of service from suppliers outside the UK. This is a particular issue for VAT exempt, partly exempt businesses and certain charities who have input tax restrictions

  1. Export of services

Some good news; HMRC have stated the rules will stay as close as possible to what they are now!

As you can see, unfortunately, there will not be a one size fits all solution because a businesses’ responsibilities will depend on that businesses’ activities.

If you would like help with your business VAT to get 'Brexit ready', please contact partners@rjp.co.uk.

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