Tag Archives: VAT-reporting

VAT: New guidance on the border with the EU post-Brexit

By   14 October 2020
0

This month the government have issued new guidance: The Border with the European Union Importing and Exporting Goods on the Border Operating Model. This provides comprehensive guidance on the movement of goods from 1 January 2021 and adds to previous guidance.

This is important information for any business moving goods between GB, the EU and NI and needs to be considered for tax planning and general preparation for Brexit. These rules will likely come into force regardless of whether the UK has negotiated an agreement with the EU.

The introduction comes in three stages:

  • Stage One – January 2021
  • Stage Two – April 2021
  • Stage Three – July 2021

Stage One

Business will need to:

  • understand the requirements of EU Member States. The necessary processes must have been done and documentation completed to comply with these requirements
  • obtain a GB EORI number to move goods to or from the UK
  • if undertaking any EU customs processes, businesses will need an EU EORI
  • importers; check which goods are on the controlled goods list- if they are on the controlled goods list, a full customs declaration is required
  • if importing non-controlled goods, decide whether to delay the customs declaration for up to six months or complete full customs declarations on import
  • decide how to complete customs formalities: Most businesses are expected to use a customs intermediary
  • consider obtaining a Duty Deferment Account (DDA). A DDA allows holders to delay customs duty, excise duty and import duty, to be paid once a month rather than on individual consignments
  • check to see if a facilitation would be of benefit. There are a number of facilitations, including the Common Transit Convention
  • if importing live animals or high-priority plants, business needs to be prepared for submitting additional documentation and checks taking place at point of destination
  • exporters; be prepared to submit customs export declarations
  • hauliers; be ready to use the “Check an HGV is ready” service

Stage Two

If businesses are importing Products of Animal Origin (POAO) or a regulated plant and plant product; they will need to:

  • to submit pre-notification and the relevant health documentation

Stage Three

Businesses must:

  • meet full customs requirements including submitting declarations, regardless of whether it is a controlled or a non-controlled good
  • pay VAT and excise duty where necessary
  • submit safety and security declarations
  • be prepared for customs compliance checks either at port or an inland site
  • be prepared for relevant SPS goods to enter GB via a Border Control Post either at port or an inland site, accompanied by sanitary and phytosanitary (SPS) documentary requirements

General

From 1 January 2021

  • Customs Declarations – Importers and exporters will have to complete UK and EU customs declarations after the end of the transition period. Some locations will require pre-lodgement of customs declarations prior to the movement of goods, which will particularly affect ‘roll on-roll off’ (RoRo) movements
  • Customs Duties – Importers will need to ensure that any customs duties applicable to their goods under the new UK Global Tariff are paid. Importers will need to determine the origin, classification and customs value of their goods. There are options available to defer any payment that is due
  • VAT will be levied on imports of goods from the EU, following the same rates and structures as are applied to Rest of World (RoW) imports. VAT registered importers will be able to use postponed VAT accounting. Non-VAT registered importers have the same options available to report and pay import VAT as they do for customs duties

Businesses will need to review their processes for dealing with cross-border goods, both between the EU and Northern Ireland. This includes; customs declarations, compliance, provision of data, obtaining a duty deferment account and GB/EU EORI numbers as necessary. We also advise liaising with suppliers and customers to ensure, as far as possible, that transactions are as seamless as possible in these challenging times.

VAT: Consignment and call-off stock

By   5 May 2020
0

Consignment, call-off stock and sale or return goods

If a business is required to provide regular sales of goods to customers, a prudent business structure is to keep inventory in a warehouse near the customer, or which belongs to the customer. This is likely to reduce transport costs and provides quicker access to the goods thus reducing time in the supply chain. This practice is likely to increase after Brexit with the predicted delays at borders.  There are specific VAT rules for businesses which hold stock in foreign countries. They stipulate when, and what VAT should be charged, and if a business needs to VAT register as a non-resident trader in another EU country in which it is warehousing its goods.

Call off and consignment stock have been in the news recently (see below) so now seems a good time to consider what the terms mean, the differences and the VAT treatment applicable.

Differences 

There is often confusion over the terms; consignment and call-off stock, and they are sometimes used interchangeably. They are differentiated based on who controls access to, and use of, the goods. The difference determines the VAT requirements and compliance rules, so it is important to identify the actual arrangements a business has in place, or plan for the most beneficial outcome. Both of these measures involve the transfer of a business’ own goods – for the purposes of this article; cross-border. The transfer of goods within the same legal entity from one country to another is a deemed supply. This fact is sometimes missed, which can lead to problems.  The VAT rules differ from country to country and create legal uncertainty for businesses. Call-off stock is one of the four “quick fixes” announced by the EC aiming for uniformity. UK implementation here. However, reports mention difficulties and disharmony on a number of issues and these fixes are likely to be irrelevant in the case of a no-deal Brexit.

In summary

  • Consignment stock

Consignment stocks are created when a business transfers its own goods to another Member State to create a stock over which it has control and from which it makes supplies. Typically, there are multiple potential customers for consignment stock.

Note: Goods sent to an overseas customer on sale or return are treated in the same way as consignment stocks.

  • Call-off stock

Call-off stock is the transfer of goods by a business from one Member State to another to create a stock of goods from which its customers can ‘call-off’ ie; use and pay for the goods as and when they require them.

Not call-off stock

Goods delivered to storage facilities operated by the supplier, rather than the customer, should be treated as consignment stocks (see above). If stocks of goods are dispatched by a supplier for call-off by more than one customer, this is also likely to be consignment stock.

VAT treatment

Consignment stock

There is an initial deemed supply of own goods to form the stock which takes place in the Member State from which the goods are originally shipped. This is usually VAT free as a dispatch and the usual documentary requirements apply.

The place of subsequent supplies of the goods, once a buyer has been found (change of ownership) is usually the Member State in which the stock is held.

Because the business is transferring its own goods “to itself” in another Member State it will be making an acquisition of goods in that Member State. The business is likely to be liable to register for VAT there (or appoint a fiscal representative in the country of arrival) and to account for acquisition tax in the other Member State. Output tax will also be due (at the rate of VAT applicable in the Member State in which the goods are located) on the sale to a third party.

Consignment stock – reporting requirements

If a UK VAT registered business transfers goods to another Member State to create a consignment stock it must complete boxes 6 and 8 on the VAT return and an EC Sales List declaration reporting a value based on the cost of the goods – see HMRC Public Notice 725. The supply must be reported on an Intrastat dispatch Supplementary Declaration (SD) at the time the goods are dispatched.

As this is a supply of own goods, the value to be declared for Intrastat purposes is the amount that would have been realised in the event of a sale under normal market conditions. If the business is required to register for VAT in the partner Member State, it will have to comply with the VAT and Intrastat requirements in that Member State.

Call-off stock

As the customer has control of the goods in storage, is aware of stock movements, and may take stock whenever he requires this does not generally require the seller to VAT register in the foreign country as a non-resident trader. Such sales are treated as a “regular’ dispatch and the seller is required to show the customer’s VAT number etc on invoices and other documentation in order to treat it as VAT free in the usual way. With effect 1 January 2020 the time of supply for the intra-EC supply is the date the goods are called off by the customer. Before this date the time of supply was the date the goods were physically dispatched.

Call-off stock – reporting requirements 

The supply of call-off stock from the UK to a VAT registered business in another Member State is VAT free (subject to the normal rules). Boxes 6 and 8 of the VAT return and the EC Sales list declaration should be completed using a value based on the cost of the goods as above. An Intrastat dispatch Supplementary Declaration (SD) should also be completed at the time the goods are dispatched from the UK, again using a value based on the cost of the goods.

Latest

Following the introduction of the four VAT ‘Quick Fixes’ across the EU, HMRC published specific draft legislation regarding the ‘Call-off stock Quick Fix’. Additionally, HMRC has updated its policy paper on changes to the rules for call-off stock arrangements between the UK and EU Member States. In particular, new information on the accounting of small losses has been added.

Brexit

Unless a deal can be negotiated with the EC to replicate the current arrangements, movements between the UK and the EU27 will follow the third country rules. This means goods will be treated as imports with VAT and duty, plus a local VAT registration in most, if not all cases. Of course, this will likely mean delays and additional administration at borders, plus the addition of duty. A small ray of light (which will be of little compensation) is the removal of Intrastat and SD reporting.

This article considers UK suppliers selling goods outside the UK only. Please contact me if you have any queries on an overseas business using a consignment of call-off stock arrangement in the UK.