Tag Archives: international-tax

Managing a Customs Warehouse. Updated HMRC guidance

By   14 May 2024
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The new guidance explains how to manage a Customs Warehouse, handle goods, and process, repair and move goods.

Customs Warehouse

A Customs Warehouse is a warehouse that is under Customs control. Goods stored in a customs warehouse are not in free circulation. No duties or taxes have to be paid until that time when you ship the goods to their next destination.

There are two types of Customs Warehouse where goods may be stored.

  • Public warehouse

This is a warehouse operated by a business whose purpose is to store other people’s goods. They are the warehousekeeper and you’re the depositor.

  • Private warehouse

This is a warehouse operated by you to store your own goods. You are the warehousekeeper and the depositor.

You do not need to be authorised by HMRC to be a depositor in a public or private customs warehouse but, if you operate a private customs warehouse, you’ll need to be authorised as the warehousekeeper.

The warehousekeeper is responsible for coordinating general warehouse operations and activities including shipping and receiving deliveries, conducting stock checks, documenting warehouse transactions and records, and storage of inventory.

To be approved as a warehousekeeper, a person will need to:

  • be established in the UK
  • have an EORI number
  • be financially solvent
  • have a good compliance record in dealing with customs
  • prove you have a business need for the warehouse
  • be able or prepared to make declarations, or employ an agent who is
  • be able to keep inventory records and run the warehouse to health and safety standards
  • provide a guarantee if needed for Customs Duty and VAT unless you’re an Authorised Economic Operator or can meet Authorised Economic Operator conditions

Guidance Amendments

Updates include information for warehousekeepers who use a duty management system and guidance on when someone else uses your warehouse.

VAT: Business Brief on Tour Operators’ Margin Scheme B2B

By   22 April 2024
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HMRC have issued a BB 5(2024) on Tour Operators’ Margin Scheme (TOMS) for business to business (B2B) wholesale supplies.

This document:
  • sets out the VAT accounting for TOMS B2B wholesale supplies
  • explains that businesses may choose whether to apply TOMS to B2B wholesale supplies
  • details a technical change to the treatment of B2B wholesale supplies in relation to TOMS

Ultimately, the policy allowing businesses to choose whether to apply TOMS to B2B wholesale supplies remains unchanged.

New centralised HMRC website to manage imports and VAT

By   15 April 2024
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HMRC guidance

HMRC has published a website Manage your import duties and VAT accounts, which provides a centralised place from which businesses importing goods can manage payment and guarantee accounts, manage and view authorities, and download duty deferment statements, import VAT certificates, postponed import VAT statements, and notification of adjustment statements. The website can only be accessed via the Government Gateway.

From this site a business can:

  • view and manage its cash account (top up and withdraw funds)
  • set up a Direct Debit for, and top up a duty deferment account
  • request older statements and certificates
  • view and manage a general guarantee account
  • manage the email address linked to an account
  • access secure messages from HMRC related to the account
  • set up, manage or view account authorities

Downloads are also available for:

  • duty deferment statements
  • import VAT certificates (C79)
  • postponed import VAT statements
  • notification of adjustment statements

To use the service a business must be subscribed to the Customs Declaration service.

VAT Registration – New guidance for Non-Established Taxable Persons (NETP)

By   8 April 2024
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HMRC has published an updated version of Notice 700/1: Who should register for VAT.

Information about non-established taxable persons (NETPs) has been updated to include guidance on when they need to apply for VAT.

Other updates include:

  • a definition of what a UK establishment is
  • when and how NETPs registers for VAT
  • how NETPs who are overseas sellers register for VAT
  • what happens when NETPs do not comply with VAT requirements
  • guidance for when NETPs can register voluntarily has been removed
  • guidance for Making Tax Digital (MTD) for VAT Returns
  • penalties for late notification to HMRC
  • new European threshold for distance selling into an EU Member State

Customs: Example declarations for exports from GB updated

By   19 March 2024
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This Guidance provides examples to help with the completion of declarations on the Customs Declarations Service for exports. It has been updated with the addition of a standard pre-lodged export declaration document.

VAT registration HMRC update

By   20 February 2024
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HMRC has updated VAT Notice 700/1 – Who should register for VAT. The publication explains when a business must register for VAT, and how to do it.

The changes are to para 2.7 – Specified Supplies which sets out what needs to be included during the application process when describing business activities.

Businesses affected

Those that supply; finance, insurance services, or investment gold to customers in countries outside the UK, or make supplies of insurance or finance services which are directly linked to the export of goods outside the UK.

Specified Supplies

These are supplies which would be exempt from VAT if they were made in the UK, but are treated as taxable if made outside the UK.

Benefit to business

A business making Specified Supplies may register for VAT on a voluntary basis and claim UK input tax incurred in making those supplies. We strongly recommend that all businesses in the above categories consider registering in the UK.

The amendment

If a business is registering because it makes Specified Supplies, it must ensure that it clearly states ‘SPECIFIED SUPPLIES’ in the free-text box when asked to describe the business activities during the application process. Failure to do this will likely cause delays and create additional HMRC queries.

The interaction between Transfer Pricing and VAT

By   20 February 2024
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Are Transfer Pricing (TP) adjustments subject to VAT? – Usually no, but…

What is TP?

A transfer price is the price charged in a transaction between two parties. The transfer pricing legislation concerns itself with the prices charged in transactions between connected parties as, in such circumstances, the price charged may not necessarily be that which would have been charged if the parties had not been connected.

The UK’s transfer pricing legislation details how transactions between connected parties are handled and in common with many other countries is based on the internationally recognised ‘arm’s length principle’.

The UK allows only for a transfer pricing adjustment to increase taxable profits or reduce a tax loss. It is not possible to decrease profits or increase a tax loss.

The UK’s transfer pricing legislation also applies to transactions between any connected UK entities.

The arm’s length principle applies to transactions between connected parties. For tax purposes such transactions are treated by reference to the profit that would have arisen if the transactions had been carried out under comparable conditions by independent parties.

So, is a TP adjustment additional consideration for a supply?

VAT

Value of the supply – what is the consideration?

TP is a direct tax concept which does not necessarily align with VAT considerations. Unhelpfully, there are no provisions in UK legislation which provides for the VAT treatment of TP adjustments. Additionally, there is no case law on this subject.

As a TP adjustment is solely for direct tax purposes, it does not usually affect the value of the supply for VAT purposes. Consequently, such adjustments are usually outside the scope of VAT.

However, price adjustments of previous supply of goods/services must be recognised for VAT market value rules only when:

  • the supply is taxable
  • the relevant input tax is not fully recoverable and
  • HMRC issues an ‘Open Market Value Notice’ to the parties requiring them to apply market values for VAT.

VAT Act 1994, Schedule 6, Part 2, para 1 gives HMRC the vires to issue such a Notice.

Latest

We understand that a case: Arcomet Romania is due to be heard by the CJEU on whether TP adjustments represent consideration and we await the outcome which may provide clarity. (Although after Brexit, the previous position: that the UK VAT Act is to be interpreted with EU case law and general principles of EU law has ended. UK courts whilst still relying on the UK VAT Act and its EU VAT Directive principles, will be able to deviate from ECJ case law).

 

 

VAT: Evidence for exports. The H Ripley case

By   13 February 2024
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Latest from the courts

In the H Ripley & Co Limited First Tier Tribunal (FTT) case the issue was whether the appellant had satisfactory evidence to support the zero rating of the export of goods (scrap metal).

Background

HMRC denied zero rating on the basis that the appellant did not provide satisfactory evidence to support the fact that the scrap metal was removed from the UK.

The requirements are set out in VAT Notice 725 para 5 and acceptable documentary evidence may include:

  • the customer’s order – including customer’s name and delivery address
  • inter-company correspondence
  • copy sales invoice
  • advice note
  • packing list
  • commercial transport documents from the carrier responsible for removing the goods from the UK, for example an International Consignment Note (CMR) fully completed by the consignor, the haulier and signed by receiving consignee
  • details of insurance or freight charges
  • bank statements as evidence of payment
  • receipted copy of the consignment note as evidence of receipt of goods abroad
  • a signed CMR document or note
  • a bill of lading
  • an airfreight invoice
  • an invoice from the carrier of the goods
  • official documents issued by a public authority, such as a notary, confirming the arrival of the goods
  • any other documents relevant to the removal of the goods in question which you would normally get in the course of business

or a combination of the above.

HMRC advised the appellant that it had received an information request from the Belgian tax authorities in respect of certain transactions and consequently, HMRC required information on the company’s documents in connection with the supplies. On receipt of the information HMRC concluded that the evidence was insufficient to support zero-rating so the sales were treated as standard rated and the appellant’s repayment claim was reduced to reflect this.

In these circumstances the burden of proof is on the appellant to show that it has satisfied the conditions set out in Notice 725 to zero-rate its supplies and provide documentation to show that the goods were removed from the UK.

Decision

The court noted that it was not HMRC’s position that supplementary evidence could not be provided post the required three-months period but that it was entitled to decline the additional evidence when it was provided some 18 to 30 months after the three-month period. It was clear that the evidence of removal must be obtained within three months and not that the valid evidence is brought into existence within the three-month time limit and obtained at some future date.

Notice 725 sets out the conditions which attach to the entitlement to zero-rate supplies. The FTT considered it to be clear from paragraph 4.3 and 4.4 (which have the force of law) that the onus is on the exporter company claiming zero-rating to gather sufficient evidence of removal within three months of the date of the supply. If it does not do so, it is not entitled to zero-rate the supplies.

Specifically, the court considered:

  • Sales Invoices – did not provide clear evidence that the goods were removed from the UK. Despite the invoices confirming the sale of scrap metal to a Belgium registered company it did not follow that the address of the purchaser is the same address as the destination that the goods were sent to.
  • Bank Statements – simply provided proof of payment they did not confirm who received the goods nor where the goods were delivered.
  • Weighbridge Tickets – merely confirm a consignment of scrap metal was sold to a Belgium based company and the goods were collected by a UK registered vehicle.
  • CMRs – none of the CMRs were fully completed by the haulier and signed by the receiving consignee.
  • P&O Boarding Cards –a taxpayer must have in its possession valid evidence of export within three months from the time of supply. The boarding cards were not provided to HMRC until 30 May 2018, some 18 to 30 months after the disputed consignments took place. It was not disproportionate for HMRC to state that the time limit for obtaining valid evidence of removal was three months and that the substantive requirements of Notice 725 had not been met. In any event, the court did not accept that the boarding cards evidence the exports of the scrap metal; none of the reference numbers on the boarding card match those used in any of the other documents and none of the lead names on the boarding cards match any of the other names in any other document. The boarding cards do not have any identifying features such that they may be matched with any of the disputed consignments.
  • E-mails and WhatsApp messages –none of the messages evidence that the loads were exported. At best they evidence a request from the buyer to a carrier to collect goods from the supplier’s yard and the WhatsApp messages were silent on whether the loads were exported from the UK.

The appeal was dismissed, and the assessments were upheld because none of the documents either individually or taken as a whole, were sufficient evidence to support zero-rating.

Commentary

Yet another case illustrating the importance of insuring correct documentation is held. It is not sufficient that goods leave the UK, but the detailed evidence requirements must always be met.

VAT: HMRC agent update

By   23 January 2024
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HMRC have published a recent agent update. In respect of VAT it covers:

  • reporting accurate tax turnover for VAT registration
  • reporting VAT deregistration to HMRC
  • reporting dissolved companies and VAT deregistration to HMRC
  • reporting insolvent companies and VAT deregistration to HMRC
  • intending traders
  • DIY housebuilders’ scheme digitalisation
  • changes for goods moving from the island of Ireland to GB from 31 January 2024

 

Why are Certificates Of Origin important? An overview

By   18 December 2023
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What is a Certificate of Origin (CO)?

 A CO is a formal, official document which evidences in which country a good or commodity was manufactured. The certificate of origin contains information regarding the product, its destination, and the country of export.

A CO is required for most treaty agreements for cross-border trade and have become more important since Brexit (no more single market alas).

Why is a CO important?

The CO is an important document because it determines whether certain goods are eligible for import, or whether goods are subject to duties.

CO – General

Customs officials expect the CO to be a separate document from other commercial documents such as invoices or packing lists. Officials may also expect it to be signed by the exporter, the signature notarised, and the document subsequently signed and stamped by a Chamber of Commerce. Additionally, the destination Customs authority may request proof of review from a specific Chamber of Commerce.

Some countries accept electronically issued COs which have been electronically signed by a Chamber of Commerce.

Types of CO

A CO can be either in paper or digital format and must be approved by the requisite Customs Authority.

There is no standard CO document for global trade, but a CO prepared by the exporter, has at least the basic details about the product being shipped.

Non-Preferential Cos

Non-preferential COs, also known as “ordinary COs” indicate that the goods do not qualify for reduced tariffs or tariff-free treatment under trade arrangements between countries. If an exporting country does not have in place a treaty or trade agreement with the importing country, an ordinary CO will be needed.

Preferential COs

This is for shipments between countries with a trade agreement or reduced tariffs and proves the goods qualify for reduced import duties.

Legalised CO

Some countries require additional information to demonstrate the authenticity of the information in the CO. A Legalised CO is an ordinary CO that has been further authenticated. The legalisation process usually involves the CO being validated by various appropriate authorities to give more evidence to its authenticity.

Certified CO

A Certified CO is similar to a n ordinary CO. However, it has been certified by a Chamber of Commerce, government agency or other relevant authority to confirm its authenticity.

Certification involves an in-depth review of all of the information declared on the CO, as well as a thorough side-by-side comparison with the requirements of the trade agreement and regulations of the country of import to ensure full compliance.

EUR1

A EUR1 certificate is used in trade between the UK and partner countries. It is used to confirm that goods originate in the EU or a partner country so that the importer can benefit from a reduced rate of import duty.

EUR1 certificates are issued by Chambers of Commerce or Customs offices.

Contents of a CO

A CO will typically contain the following information:

  • name and contact information of the manufacturer of the goods
  • country of origin
  • contact information of the exporting agent
  • contact information of the receiver/importing agent
  • description of the goods, including the appropriate product codes
  • quantity, size, and weight of goods
  • A waybill or bill of lading number
  • means of transport and route information
  • commercial invoice of payment

* A waybill is a document issued by a carrier giving details and instructions relating to the shipment of a consignment of cargo. It shows the names of the consignor and consignee, the point of origin of the consignment, its destination, and route.

How do I find out if I need a CO?

A business will need to check with its local Chamber of Commerce.