Tag Archives: brexit-transitional

VAT: Brexit latest

By Marcus Ward 23 June 2020

The European Commission (EC) has published an updated Notice to Stakeholders which covers the UK leaving the EU.

The original document which was published in 2018 has been amended to reflect the latest developments which mainly include the official Brexit on 1 February 2020 and the current transition period, which, as matters stand, will end on 31 December 2020. Until that date, EU law in its entirety applies to the UK

The Notice includes:

The legal position from 1 January 2021
VAT rules for cross-border services
The VAT General Rule
MOSS
Refunds of VAT
Separation provisions of the Withdrawal Agreement
The supply of other services
Refund requests relating to VAT paid before the end of the transition period

The Notice states that; “…during the transition period, the EU and the UK will negotiate an agreement on a new partnership, providing notably for a free trade area. However, it is not certain whether such an agreement will be concluded and will enter into force at the end of the transition period”. I think that this is likely to be a charitable conclusion!

The EC advises businesses:

when they are established in the EU, to familiarise themselves with the rules applicable to services supplied to and received from third countries (which the UK will become from 1 January 2021)
when they are established in the UK, to examine whether new liability rules will apply to them with regard to their services supplied in the EU
to take the necessary steps in respect of services covered by MOSS
consider the changes in the VAT refund request procedures

The Notice does not cover the supply of goods nor digital services themself.

General

After the end of the transition period, the EU rules on VAT for services no longer apply to, and in, the UK. This has, particular consequences for the treatment of taxable transactions in services and VAT.

Businesses need to understand the probable changes and make preparations for a No-Deal Brexit.

A Round-Up of three new EU VAT measures

By Marcus Ward 24 February 2020

With the end of the Brexit transition period looming, the EU have announced new measures:

e-commerce VAT fraud

The first measure is the European Commission (EC) approving (this month) new measures to transmit and exchange payment data in order to fight e-commerce VAT fraud. Member States will be assisted in their fight against e-commerce VAT fraud by the launch of a Central Electronic System of Payment (CESOP) information arrangement.

CESOP will keep records of cross-border payment information within the EU, as well as payments to third countries or territories, for a period of five years. This will allow tax authorities to properly control the correct fulfilment of VAT obligations on cross-border Business to Consumer (B2C) supplies of goods and services.

The measures will be implemented on 1 January 2025.

Simplified rules for small businesses

The EC has also recently adopted simplified VAT rules applicable to small businesses. The new measures are intended to reduce the administrative burden and compliance costs for small enterprises and create a fiscal environment which will help small enterprises grow and trade across borders more efficiently.

The measures foresee that small enterprises will be able to qualify for simplified VAT compliance rules where their annual turnover remains below a threshold set by a Member State concerned, which cannot be higher than 85 000 EUR. Under certain conditions, small enterprises from other member states, which do not exceed this threshold, will also be able to benefit from the simplified scheme, if their total annual turnover in the whole of the EU does not exceed 100 000 EUR.

The new rules will apply as of 1 January 2025.

New rules for exchange of VAT payment data

In addition to the anti e-commerce fraud proposals above, new measures will enable Member States to collect, in a harmonised way, the records made electronically available by payment service providers, such as banks. These complement the VAT regulatory framework for e-commerce coming into force in January 2021 which introduced new VAT obligations for online marketplaces and simplified VAT compliance rules for online businesses.

The new measures will apply as of 1 January 2024.

How these new incentives affect UK businesses remains to be seen as our future trading relationship with the EU is, to put it diplomatically, unclear.

Brexit – Introduction of new import controls on EU goods

By Marcus Ward 17 February 2020

More red tape and delays

The government has announced new plans to introduce import controls on EU goods at the border from 1 January 2021, the day after the end of the Brexit transition period.

This will almost certainly mean additional complexity and delays at borders and will damage businesses, especially those which operate on a Just In Time (JIT) basis or import fresh food, flowers or any other goods which are subject to rapid deterioration.

It is difficult to divorce politics from commerce in these circumstances, but I have avoided commenting on this decision on a political basis, although I think it is fair to say I am not in favour.

The government commented that all UK exports and imports (currently called dispatches and acquisitions from the EU) will be treated equally. This will mean traders in the EU and GB will have to submit customs declarations and be liable to goods’ checks. It was also confirmed that the policy easements put in place for a potential No Deal Brexit will not be reintroduced as businesses have time to prepare. (HMRC have withdrawn a collection of guidance on issues including tariffs, origin, and quotas, which was prepared for a potential No Deal Brexit).

It is difficult to identify how businesses could have had time to prepare as HMRC guidance was unhelpful on this point and it was, and still is, unclear what precise arrangements a business has to prepare for. It is assumed that this a unilateral UK’ decision and it cannot be helpful for cooperation negotiations, unless these controls are what are actually wanted. In the document, it is stated that: ”Business can prepare for border controls by making sure they have an Economic Operator Registration and Identification (EORI) number, and also looking into how they want to make declarations such as using a customs agent”. That is the extent of the advice provided and repeats what has been said before.

Without wanting to amplify government propaganda, but in the interest of even-handedness, below are the reasons given for implementing import controls:

to keep our borders safe and secure so we know who’s coming in and how often, what they are bringing in, and why
to ensure we treat all partners equally as we begin to negotiate our own trading arrangements with countries around the world
to collect the right customs, VAT and excise duties
the EU has said it will enforce checks on our goods entering the Eurozone. We will likewise enforce our own rules for goods entering the UK

Also, HMRC extended the deadline for businesses to apply for customs support funding to 31 January 2021. To date, applications have been made for around £18.5 million out of a possible £26 million.

This announcement follows on from the consideration of the introduction of UK freeports here.

I hope that there are enough customs agents to go round, although the lack of any evidence that HMRC is recruiting new Customs officers suggests that perhaps it is not fully prepared itself.

VAT and Customs Duty: Brexit latest

By Marcus Ward 20 August 2019

HMRC has been issuing guidance in readiness for Brexit, and in particular, a No Deal Brexit.

They generally provide information on preparations and actions required by business that trade cross-border.

Imports

If a business bring goods into the UK from the EU there are actions you should take before and after you’ve imported the goods. This applies to:

importers
freight forwarders
fast parcel operators
customs agents
traders who move their own goods

(This guidance does not apply to moving goods between Ireland and Northern Ireland). A border on the island of Ireland is a whole other matter.

The full guidance for importers.

Exports

Again, this guidance relates to:

exporters
freight forwarders
fast parcel operators
customs agents
traders who move their own goods.

The full guidance for exporters.

Email updates on Brexit

We recommend that business falling within the above definitions sign up the free HMRC Brexit email alert service.

This service covers: information about Brexit including the Article 50 process, negotiations, and announcements about policy changes as a result of Brexit.

It is crucial that businesses understand the impact of a No Deal Brexit and make preparations for all eventualities of the political negotiations. Sign up here

VAT: Brexit – Intending Trader registration for overseas businesses

By Marcus Ward 14 June 2019

With the continuing uncertainty over a No-Deal Brexit, which appears to be a more likely prospect given recent political events, HMRC has made a statement on the process of registering non-UK EU businesses as intending traders in the UK.

Background

What is an intending trader?

An intending trader is a person who, on the date of the registration request:

is carrying on a business
has not started making taxable supplies
has an intention to make taxable supplies in the future

If the business satisfies HMRC of its intention, HMRC must VAT register it. VAT Act 1994, Schedule 1, 9 (b). It is, in some cases, difficult to convince that there is a genuine intention to make taxable supplies. This often comes down to documentary evidence.

Why do overseas businesses need to register as intending traders?

In the event of a No-deal Brexit, it is assumed that the EU VAT simplification that relieves the current obligation to be registered in the UK will no longer available. As a consequence, the EU supplier will itself become responsible for accounting for VAT on sales deemed to be made in the UK. In order to do this, the business will require a UK VAT registration. As the simplification is in place until Brexit, the registration will be required the very day after the UK leaves the EU – currently 1 November 2019.

Therefore, many EU businesses have applied for UK VAT registration as intending traders. That is, they do not currently make supplies, but intend to in the future (from 1 November 2109).

The issue

The Chartered Institute of Taxation has reported that businesses applying for intending trader registrations are experiencing difficulties with the process.

In response, HMRC have stated:

“Businesses in the position you have described can register for VAT using the Advanced Notification facility, by registering online requesting a voluntary registration from an advanced date of 1 November 2019. In the ‘business activity’ section they should enter trade class/SIC code 99000 European Community. In the free text box they should describe accurately what the business does and ensure there is a positive amount entered in the ‘taxable turnover in the next 12 months’ box. If this is not done the application will be rejected. This information will enable the VAT Registration Team (VRT) to identify and actively manage any registration that is conditional on the UK leaving the EU without a deal.

If there is a change to the date of withdrawal from the EU, the VRT will amend the Advanced Notification date to match this new date. If the UK enters a transitional period or agrees a deal with the EU that allows current arrangements to continue then the registration will be cancelled. The approval of an Advanced Notification registration in these circumstances is only made as a contingency for the UK leaving the EU without a deal and the VAT number may not be used unless that happens. The business will receive an automated notification of an Advanced Notification VAT Registration and the VRT may follow this up with a manual letter to further explain the conditions and both.

With the UK having agreed an extension to the date of withdrawal from the EU, we would not expect businesses to use this facility until closer to the 1st November.”

It is clearly prudent for overseas businesses which make certain supplies in the UK to properly prepare for a No-Deal Brexit. However, experience insists that many have not identified or made provisions for this outcome.

We are able to assist and advise other EU Member State businesses on this process.