Category Archives: Brexit

VAT registration delays – latest

By   8 March 2021
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Anecdotally, we understand that some businesses applying for registration are experiencing significant delays. Further, attempts to contact HMRC by email is often difficult, and telephones are regularly not answered (although we understand that some people have enjoyed more success with the webchat).  Also, the Non-Established Taxable Persons (NETP) office has moved, right at the time when more EU businesses need to register in the GB due to Brexit. This has created an even longer backlog.

Confirmation

The Business Delivery Team at HMRC has confirmed that it is attempting to deal with a very high number of applications, which are being delayed for various reasons (not least by the sheer volume one expects). The department has also stated that the following actions and checks will assist with faster processing times and urges applicants to check that all information requested set out here is included with the application to avoid any further delays.  The most salient being to use the online method rather than the hard copy. However, this is not always possible if additional documentation needs to be sent.

How to avoid common errors identified by HMRC 

  • ensure that the addresses provided on the VAT 1 form matches the business’s principal place of business (PPOB)
  • check that the notification of a trade classification matches the supplies the business makes
  • the VAT treatment of activities must be correctly identified
  • the correct person must sign the application – eg; for a corporate body it must be a director, company secretary or authorised signatory or an authorised agent
  • ensure the correct registration date (effective date of registration – EDR) is given. And that the EDR is accurate considering the circumstances that have been outlined for requesting registration elsewhere in the application
  • the bank account details provided must be in the name of the taxable person

And I will add; do not forget form VAT5L when registering a business which is involved in land and property transactions.

The Business Delivery Team also stated that “We are also considering how we can improve the registration process by resolving more cases in real time by telephone and engaging with customers in a different way to gather any further required information. We’ll tell you more about this shortly.”

While any improvement in communication is to be welcomed, it remains to be seen what practical measures will be implemented to speed up registration processing and how soon these will be put in place.

 

VAT: Postponed Accounting

By   9 February 2021
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VAT Basics

A quick look at Postponed Accounting (PA) and what it means for a business after Brexit

Pre-Brexit (if one remembers such halcyon days) acquisitions from other Member States crossed the UK border without any formalities as there was free movement of goods within all of the EU.

Now that GB is a third country, it is unable to take advantage of the benefits of a single market, so acquisitions become imports and are required to be declared when imported. However, gov.uk has announced he return of PA in an attempt to simplify matters.

PA

PA is accounting for import VAT on a VAT return means a business declares and recovers import VAT on the same return, rather than having to pay it upfront and recover it later. This means neutral cash flow; which is to be welcomed.

The normal rules about what VAT can be reclaimed as input tax will apply.

PA also has the advantage that imported goods are not delayed at the entry port while VAT paperwork and payment is completed. Of course, as experience has demonstrated; there may be other reasons for delays to imports and exports.

Who can use PA?

From 1 January 2021, if a business is registered for VAT in the UK, it will be able to account for import VAT on its return for goods it imports into:

  • GB (England, Scotland and Wales) from anywhere outside the UK
  • Northern Ireland from outside the UK and EU

There will be no changes to the treatment of VAT for the movement of goods between Northern Ireland and the EU.

A business does not need approval to account for import VAT on its returns.

How does PA work practically?

VAT is payable on imports of over £135 arriving into the GB from any country in the world, which now includes the EU. Practically, PA is similar to the current Reverse Charge. Output and input VAT is accounted for on the same VAT return.

When completing a customs declaration a business may choose how to account for VAT on its return.

If the Customs Handling of Import and Export Freight (CHIEF) system is used:

On the declaration, the following needs to be entered:

  • the EORI number starting with ‘GB’ which includes the VAT registration number into box 8, or, if applicable, the VAT registration number in box 44h
  • ‘G’ as the method of payment in Box 47e

If the Customs Declaration Service is used:

The VAT registration is entered number at header level in data element 3/40.

Returns

  • Box 1 – Include the VAT due in this period on imports accounted for via PA.
  • Box 4 – Include the VAT reclaimed in this period on imports accounted via PA.
  • Box 7 – Include the total value of all imports of goods included on your online monthly statement, excluding any VAT.

Using someone to import goods on your behalf

If a business uses a third party to import goods on its behalf (eg; a freight forwarder, customs agent, or fast parcel operator) it will need to inform them how it wants to account for VAT on those imports, so that they can complete the customs declaration correctly.

Alternatives

The use of PA is optional. The alternative is to pay VAT on goods when they enter the UK. This means the use of the “usual” C79 certificates sent by HMRC on which input tax may be reclaimed (rather than any other documentation, eg; invoices).

Northern Ireland

Goods moved to NI from the EU are not impots (NI remains part of the EU, so the old rules on acquisitions still apply and no import VAT is due).

Customs Duty

Alongside additional border formalities, Customs Duties may be payable on certain goods. This Duty is not reclaimable like VAT. Most of the complexities of Customs Duty relate to the rules of origin.

Commentary

PA is a relief for businesses importing from the EU. It is a simple system and will be familiar to any business which applies Reverse Charges. With all the varying changes applying post-Brexit, this is one area which should not affect a business importing from the EU in terms of port delays or negative cash flow. To date, there is no evidence on how well the system is working, but anecdotally, I understand that this part of Brexit changes has not thrown up any issues, unlike other problems which have been widely reported. I stand to be corrected though.  

VAT: New gov.uk EORI tool

By   21 January 2021
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Gov.uk has provided a new tool to check a business’ EORI number. (This used to be an EC resource now not available due to Brexit).

A guide to EORI here

A business may need to demonstrate to HMRC that it has carried out proper due diligence in certain cases.

Contact

If you have queries, or would like to obtain specific EORI advice, contact the HMRC EORI team using the online form

Access

Who has access to an EORI number?

The general public can access limited data, When a business is notified of its EORI number, it will be asked whether it objects to this data being published on the site.

VAT: New HMRC guidance for using international post and merchandise in baggage

By   19 January 2021
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HMRC has published two new sets of guidance for international post users and importing merchandise in baggage. The changes are mainly due to Brexit.

International post users

HMRC has published new guidance for international post users.  

The notice explains what happens when a business imports or exports goods by post through Royal Mail or Parcelforce Worldwide.

The arrangements set out in the notice do not apply when a full declaration on a single administrative document (SAD – Form C88) is required.

The information about sending a package overseas has been updated. This relates to the new need to compete a customs declaration for goods sent to the EU.

Bringing commercial goods into Great Britain in baggage

The guidance covers commercial goods (also known as Merchandise in Baggage) which will be used, or sold by a business, where: 

  • a commercial transport operator does not carry them for a business
  • a person has travelled to GB carrying goods either:
    • in accompanied baggage
    • in a small vehicle that can carry up to no more than 9 people and weighing 3.5 tonnes or less

A person must declare all commercial goods. There is no duty-free allowance for goods brought into GB to sell or use in a business.

My guide to importing and exporting post Brexit here.

VAT: Brexit outcomes – retailers

By   19 January 2021
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I been asked many times about the VAT position of UK residents buying goods online (and also by more traditional methods) so I thought a brief overview would be helpful.

It has been reported in the media that some overseas retailers have stopped selling to UK customers. This is a commercial decision and is not necessarily solely due to Brexit (although, clearly that hasn’t helped).

What has changed?

Pre Brexit, under the Distance Selling rules, VAT at the rate applicable in the seller’s country would be chargeable by overseas suppliers to UK recipients. This was in the same way as a domestic sale. There were then thresholds which, when breached, resulted in the seller registering in the customer’s country, but these were rarely exceeded by small or SME businesses. The Distance Selling rules still apply to EU Member States, but not the UK.

As the UK is now a ”third country” sales to the UK from the EU which were previously intra-community sales are now imports. From 1 January 2021, sellers of goods B2C (to UK individuals) with a value below £135 – so called low value consignments are required to VAT register in the UK – more details here.  Clearly, many businesses are loath to do this hence their refusal to sell to UK customers. This change is not a result of Brexit but was a measure to level the playing field between EU and non-EU supplies (the latter often escaping the tax completely). From 1 July 2021 similar rules will apply to UK businesses selling to individuals in the EU, although there is likely to be a simplification measure; the so-called One Stop Shop (OSS).

Additionally, UK customers are usually responsible for the new post-Brexit import of goods, so there may be unexpected new VAT, duty and courier costs when buying certain goods from EU countries. This is similar to buying goods from any other country in the world.

It would appear that there will be a reduction in cross-border trade (in both directions) with the UK, and that is without factoring in shipping issues and delays at new borders.

VAT: Tour Operators’ Margin Scheme (TOMS) – changes ahead?

By   12 January 2021
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TOMS is complex, time consuming, potentially costly and a major headache for tour operators. It does aim to simplify VAT accounting as it avoids businesses having to VAT register in every EU Member State in which it provides services.

But, are there changes ahead? The European Commission has published a Factual summary report which looks at TOMS. The consultation was to gather evidence in order to evaluate the scheme in terms of ;

  • does it remain effective
  • to what extent existing rules remain relevant and aligned with stakeholders’ needs
  • identification of potential distortions of competition
  • the regulatory costs and benefits for businesses taxed under the scheme

Since Brexit, HMRC have stated that TOMS still applies in the UK, but supplies in the EU which were previously VATable were now zero rated. The result is that only supplies in the UK are subject to VAT on the margin achieved. The future is unclear however. There is no longer a level playing field between the UK and other EU countries as UK operators’ have an advantage. The potential outcomes(to my mind) are:

  • the position remains the same
  • UK operators will be required to VAT register in every Member State it sells holidays to (or at least some)
  • the above report will address the issues (but will not be binding on the UK

The rules of TOMS are not currently fully harmonised and there are variations in the way EU Member States treat non-EU travel companies (such as the UK now). There are also differences in the services which are, and are not, covered by TOMS. Watch this space…

VAT: Fiscal representation in the UK

By   12 January 2021
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As Brexit is all completely finished * * hollow laugh * * I look at what overseas businesses operating in the UK need to know in respect of compliance.

What is fiscal representation?

It is a safeguard for the authorities responsible for VAT in the EU (and UK). If it is not possible to collect tax from the taxable person, they can go to the representative who is usually jointly and severally responsible for the debt.

Each EU Member State has its own rules on representatives, but here I look at what overseas businesses need to do in the UK, and what the responsibilities are for a business acting in such a role. A representative must meet a set of tests to ensure that it is fit and proper in order for it to be allowed to act in a representative capacity.

In most cases, overseas businesses with no place of belonging in the UK register as a Non-Established Taxable Person (NETP).

Choices

If a business is a NETP, it will have a choice in how it registers and accounts for VAT in the UK (although in certain circumstances, HMRC have the power to direct a business appoint a tax representative).

Deal with UK VAT itself

In most cases an overseas business can deal with VAT without third party assistance. However, it must be able to:

  • register for VAT at the correct time
  • keep a record of everything it buys and sells in the UK
  • keep all the records needed to complete its VAT Return
  • produce records and accounts to HMRC for inspection
  • keep a note of all VAT paid and charged for each period covered by the return
  • pay the right amount of tax on time

Tax representative

A NETP may appoint a tax representative who:

  • must keep its principal’s VAT records and accounts and account for UK VAT on its behalf
  • is jointly and severally liable for any VAT debts the NETP incurs

A NETP is obliged to provide all of the information required to fulfil its obligations.

Tax Agent

A NETP may appoint a tax agent to act on its behalf. Such an arrangement will be subject to whatever contractual agreement the NETP and the agent decide. The significant difference to a tax representative is that HMRC cannot hold the agent responsible for any of the NETP’s VAT debts. This is clearly a better position for a UK business acting on behalf of a NETP. HMRC can decide not to deal with any particular agent appointed. Also, in some circumstances, if HMRC think it is necessary, it may still insist that a tax representative is appointed – this is usually in cases where there is a risk to the revenue. Additionally, HMRC can ask for a financial security.

As with the appointment of tax representatives a NETP:

  • may only appoint one person at a time to act as its agent (although an agent may act for more than one principal)
  • must still complete the appropriate form to apply for registration
  • HMRC require a NETP’s authority before it can deal with an agent
  • Needs to give the agent enough information to allow them to keep the VAT account, make returns and pay VAT

It is possible to appoint an employee to act as a VAT agent.

Penalties

As is to be expected, get any of the above wrong and there are penalties!

VAT: New registration checking service

By   11 December 2020
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The Government has launched a website for checking UK VAT numbers as EU VIES will no longer be available post Brexit.

This service can be used to check:

  • if a UK VAT registration number is valid
  • the name and address of the business the number is registered to

If you are a UK VAT-registered business, you can also use this service to prove when you have checked the validity of a UK VAT number.

VAT: Exporting and importing businesses -prepare for Brexit

By   8 December 2020
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New rules from 1 January 2021.

GOV.UK has published new guidance from the Department for International Trade.

The guidance sets out what a business will need to do 1 January 2021. It will be updated if anything changes.

It covers:

The UK Global Tariff

Find a commodity code

Check tariffs

Trade agreements

Exporting to and importing from the EU

Exporting to and importing from non-EU countries

Import controls and customs

Trade remedies

All business with goods crossing the new border will need to understand and prepare for the changes.

VAT: Check UK trade tariffs from 1 January 2021

By   6 November 2020
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HMRC has published information on Tariffs.

You can use this service to check the UK Global Tariff that will apply to goods imported post-Brexit. It also shows the difference between what you pay now and what you’ll pay from 1 January 2021.

The UK Global Tariff will apply to all goods imported from 1 January 2021 – which will include bringing in goods from EU Member States. (currently acquisitions, not imports).