BREXIT: VAT’S IT ALL ABOUT?

Since the UK left the EU on 1st January 2021, there has been a lot of changes for businesses to make sense of.

With all this happening, it’s very easy to take your eye off the Brexit ball and the changes that are affecting your business today.

So, as a helpful reminder, we’ve produced a quick guide to make sure you have considered specifically the tax points which could be impacting your business. We have also made all the information into a infographic which you can download for free!

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Quick Update:

The government have now open the applications for the SME Brexit Support Fund. Smaller businesses can get up to £2,000 to pay for practical support,.

You can use the grant for training on:

• how to complete customs declarations
• how to manage customs processes and use customs software and systems
• specific import and export related aspects including VAT, excise and rules of origin

It can be used to help you get professional advice so your business can meet its customs, excise, import VAT or safety and security declaration requirements.

Who will be able to apply

Your business must:

• be established in the UK
• have been established in the UK for at least 12 months before submitting the application, or currently hold Authorised Economic Operator status
• not have previously failed to meet its tax or customs obligations
• have no more than 500 employees
• have no more than £100 million turnover
• import or export goods between Great Britain and the EU, or moves goods between Great Britain and Northern Ireland

Your business must also either:

• complete (or intend to complete) import or export declarations internally for its own goods
• use someone else to complete import or export declarations but requires additional capability internally to effectively import or export (such as advice on rules of origin or advice on dealing with a supply chain)

Applications will close on 30 June 2021 or earlier if all funding is allocated before this date. PWC are administering the grants and you can apply via this link.

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What has changed?

Well, to keep it as brief as possible, since the UK left the EU on 1st January, changes have been made to the way that the UK trades with the EU, as well as Great Britain trading with Northern Ireland.

Now, there are two big main changes:

• Some of the well-known EU schemes and rules have been stopped since the 1st January 2021, such as the Mini One Stop Shop scheme (MOSS) – now replaced with a non-Union MOSS scheme, distance selling and triangulation.
  
• Trading is now referred to as imports and exports, and broadly follows the principles applied to the rest of the world (with some exceptions of course – it wouldn’t be tax without this!).

The impact on businesses

At first glance, this might not look like a huge amount of change, but the rules, and nuances to consider are complex.

Check out this infographic for the core business activities you could be doing, that could be affected by Brexit.

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1. My UK Business Imports Goods From The EU?

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Have You Determined Who Is Responsible For Paying The Import VAT?

This will depend on who is defined as the importer. It should be stated in the contract between your business and the supplier, or in the terms of sale (known as incoterms).

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Have You Applied For The Postponed Accounting of Import VAT Scheme?

UK companies importing goods into the UK can use the Postponed Accounting of Import VAT Scheme by selecting the option on the customs declaration form. The scheme allows you to pay the import VAT on your VAT return rather than making cash payments of import VAT.

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How Do You Pay Import VAT? Is It The Best Option For You?

Importers can set up a Duty Deferment Account via Gov.uk that allows goods to be imported with VAT payments due monthly, direct to HMRC. This replaces paying the import VAT at the time the goods enter the UK.

Duty Deferment can be expensive so you should consider which option works best for your business.

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Are The Goods Being Imported Valued Before €150?

From July 2021, VAT much be charged at the point-of-sale for shipments not exceeding €150. This VAT may be declared and paid via a new submission called the "Import One Stop Shop"

This will create a more efficient fast-track, quick and easy customs clearance.

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Is Your Business An Online Marketplace? Changes Are Coming!

From 1st July 2021, online marketplaces are responsible for collecting and accounting for import VAT where they facilitate a sale. They will be responsible for charging UK VAT to the UK purchaser.

You should consider your obligations under these new rules.

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Do You Have An Economic Operators Registration and Identification number (EORI Number)?

If you plan to import goods into the UK, you will need an Economic Operators Registration and Identification Number (EORI). If you do not have an EROI, you may experience delays and costs such as storing goods at the port. You can apply via Gov.uk

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2. My UK Business Exports Goods To The EU

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Have You Spoken To Your Customers About The Import VAT Changes?

Any goods sold to the EU will now be subject to import VAT. You may have spoken to your customers and reviewed your contracts to discuss these changes.

Have you considered all customers especially those you don't regularly trade with?

Do you need to negotiate contracts to reflect the additional contracts?

You should ensure all customers are aware of the import VAT changes.

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Have You Retained Evidence To Prove That The Goods Have Left The Uk?

A company must retain evidence to prove that goods have left the UK. This can include evidence such as sales invoice, customs declarations, bill of lading documents and transport documents.

Usually, goods must be exported, and evidence gathered within 3 months of sale.

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Do You Sell Goods To Non-UK Consumers (B2C)?

If you sell goods to non-UK consumers, you may have a requirement to register for VAT in the EU countries you sell to.

If this is relevant to your business, you will be required to pay import VAT in that country and charge local VAT.

A special VAT fiscal representative may need to be appointed in the relevant EU country. A Fiscal Representative is a special type of VAT agent for foreign businesses with a VAT registration in another country.

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Have You Considered Changing The Way Your Goods Are Sold?

Depending on the way your goods are sold and whether intermediaries are used, you may want to consider your approach to ensure VAT can be reclaimed where appropriate.

For example, you ship the goods to your customer and the local courier/tax office sends a VAT bill to the EU customer.

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Do You Have A Economic Operators Registration and Identification Number (EORI Number)?

If you plan to export goods from the UK, you will need an Economic Operators Registration and Identification Number (EORI). If you do not have an EORI, you may experience delays and costs such as storing goods at the port. You can apply at Gov.uk

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3. My UK Business Exports Services To The EU

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Do You Obtain Evidence From Your B2B Customers That They Are Based Outside The UK?

It is recommended that you obtain evidence that your customer is based outside of the UK and are VAT registered such as by requesting a VAT or tax number.

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Have You Established The "Place Of Supply" Of Your Services?

Rules exist to determine where the place of supply of services is located. These rules tell you which country your goods are supplied in, as it is not always straightforward.

You'll need to know the place of supply to determine the VAT treatment of your exports.

It can vary based on your business location(s), the type of service provided, who your customer is (business or consumer) and where the customer is located.

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Are You A Digital Products Seller, Who Operated A VAT Mini One-Stop Shop Before 1st January 2021?

From 1st January 2021, it is no longer possible to operate a Mini One Stop Shop. This applies to companies that sell digital services direct to the consumer in the EU. This could include services such as games, telecoms and broadcasting services.

However, it is possible to register as a NON-Union MOSS Scheme in an EU member state.

The Non-Union MOSS Scheme allows you to have 1 VAT registration for your EU sales, but you must have a separate on in the UK if you need to be registered.

Each EU country's government has a website where you can register for the scheme.

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Do You Sell Service Overseas?

From 1st July 2021, for all services businesses who sell cross border services to consumers, and the place of supply is deemed to be in the EU - such as legal and professional services - can use the Non-Union MOSS Scheme.

The Non-Union MOSS Scheme allows you to have 1 VAT registration for your EU sales, but you must have a separate on in the UK if you need to be registered.

Each EU country's government has a website where you can register for the scheme.

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4. My UK Employees Travel In The EU

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Have You Reclaimed VAT Paid For Employees On Business Trips In The EU?

You can reclaim VAT paid on business services such as hotels for employee business trips in the EU. There used to be one central claim process to claim EU VAT regardless of the EU country. However from 1st January, claims must be made by the company via the specific claim system in the relevant EU country rather than one central EU wide system.

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5. My UK Business Trades Goods Between Great Britain And Northern Ireland

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Is Your Business Doing Any Of The Following:

• You move goods under a customs special procedure;
• You sell certain goods as computer chips or operate in construction from 1st March 2021 and are required to apply domestic reverse charges to ensure VAT is accounted for;
• You import goods into NI for onward supply to an EU country; or
• You sell goods via an overseas seller through an online marketplace?

Special exceptions apply to these types of activities, meaning the purchaser/importers will have a VAT responsibility i.e. registering for VAT, accounting for and charging VAT (where relevant)

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6. My UK Business Trades Goods From Great Britain Through Northern Ireland to The Republic of Ireland

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Have You Determined The Correct VAT Treatment Of Your Goods?

Complex rules apply when shipping goods from GB through NI to the ROI.

The incoterms and the time at which ownership transfers will need to be considered when determining the treatment.

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7. My UK Business Is Based In Northern Ireland and Trades With The Republic Of Ireland

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Are You Using The Correct Prefix In Front Of Your VAT Registration Number?

NI Businesses and those trading goods in NI are required to use an "XI" prefix in front of their VAT registration number rather than the "GB" prefix when trading with EU suppliers and customers.

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LET’S MAKE LIFE EASIER

You don’t want to get bogged down in VAT and Brexit, trust us, we have and it is not pretty. That’s why we’ve produced a quick guide to go with the image above.

If your business is doing any of the above activities, get in touch, as there could be tax implications we need to consider for your business.  

It’s critical you ensure your VAT is being treated correctly and so we recommend specialist advice is obtained. Without advice there is a risk of compliance issues, which can be expensive and very time consuming.

For advice implementing VAT changes in your business, please book in a call with us so that we can discuss your options.

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