Brexit Update: Do you buy or sell goods to or from the EU?
Rayner Essex Brexit update, all you need to know to be prepared.
In March, Mark Moore offered his insights and comments regarding Navigating a No Deal Brexit, now with the 31st October Brexit deadline imminent, Jason Croke our VAT Director has prepared our latest update.
If you buy or sell goods to or from the EU then you need to know the following information in order to be prepared.
The uncertainty around Brexit continues. If agreement is not reached by 31st October 2019, then a “no deal” Brexit will occur, subject to further extensions or Article 50 being revoked.
If there is a “no-deal” Brexit this will have immediate, practical, implications that must be considered by businesses trading with the EU. We will provide a summary in this guide but full details from HMRC are at : VAT for businesses if there is a no-deal Brexit
Import VAT on goods from the EU
Post Brexit, goods arriving from the EU will be subject to import duty and import VAT. HMRC have confirmed that this import VAT can be reclaimed on the VAT return : Import VAT
EORI (Economic Operator Registration and Identification) Number
HMRC have automatically issued EORI numbers to many businesses already. If your business has not had an EORI number issued by HMRC, you can apply via HMRC. There is no cost and is a sensible precaution to apply for it now. Link: Get a UK EORI number to trade within the EU
Transitional simplification of import declarations
HMRC has transitional simplified procedures for businesses importing goods from the EU. This will remove the need to pay VAT and Duties in advance, businesses must register with HMRC.
Exporting goods to EU business customers
Sales of goods to the EU will be zero-rated under normal export rules. The destination EU country will treat this as an import from outside the EU, so may be subject to import duty, import VAT and Customs procedures their end. EC Sales Lists/Intrastat no longer required.
Exporting goods to EU individuals
Post Brexit, sales to EU individuals will be exports and means:-
- For sales from the UK, these will no longer be subject to UK VAT. They will be zero-rated in the UK subject to usual proof of export.
- There is no distance selling rules post Brexit, removing any current obligation to be registered in another EU member state.
- The EU recipient may incur import duty and import VAT, paying this locally before the mail service will deliver the goods. The EU Low Value Consignment Relief (LVCR), exempts packages worth less than €22 from customs charges.
Currently, goods entering the UK from EU are duty free. Post Brexit, goods from EU/Turkey will be subject to the same import tariffs as the Rest of the World, for example clothing items will be subject to 12% duty rates, which will see the price of purchasing these goods increase, which in turn may affect your profit margins.
Businesses need to understand how import duty is applied and at what rates. Reference to specific sectors here and whilst many items remain Nil duty rate, your business must understand the potential cost increases of duty that might apply.
Cross border VAT refunds
Currently, it is possible to apply via the HMRC portal from the UK to other member states to make an EU VAT refund. Post Brexit, the process will see claims made directly to the EU member state, so language and submission problems are likely to arise.
VAT on low value consignments entering the UK
Goods sent to the UK from the EU as parcels by businesses will not benefit from low value consignment relief (LVCR). To ship parcels with a value up to £135, overseas suppliers will be required to register and account for import VAT quarterly. On goods sent by overseas business as a parcel with a value over £135, VAT will be collected from the recipient.
Supplying services to businesses and individuals
The place of supply rules which determine where VAT is due on services are expected to remain broadly the same for business customers. For individuals, see MOSS.
Electronic services-Mini One Stop Shop (MOSS)
Currently, where electronic/digital services such as downloads, online learning, etc are supplied from the UK to individuals in the EU, VAT is due in the member state where the individual is supplied. A business can register to account for VAT due to other EU member states via the UK MOSS platform.
Following a “no deal” Brexit, it will be necessary to register for MOSS in another EU member state under a Non-EU MOSS registration.
Tour Operators Margin Scheme (TOMS)
Tour operators will now no longer benefit from the Tour Operators Margin Scheme. Those involved in dealing with EU travel will need to register for VAT and discharge their EU VAT liabilities in that manner. Becoming established in another EU territory may allow the continued use of the margin scheme throughout the EU.
The UK has stated that the UK Tour Operators Margin Scheme will continue to operate for UK supplies.
VAT registration number validation
UK businesses will no longer be part of the EU VIES system. It will still be possible to validate the VAT number of an EU business on the VIES system and a UK only based system will be available to check UK VAT numbers, which will be launched on the HMRC in time for a no deal Brexit.
The information above is a current snap-shot of the governments intentions and understanding of Brexit and is a summary only.
If your business buys or sells goods to Europe, Brexit will change the manner in which you interact with your customers or suppliers.
Should any of the matters above directly affect your business and you feel that advice would be helpful then please get in touch and discuss with our VAT and Duty specialist, Jason Croke, who can explain the impact Brexit will have on your business and can also assist in guiding your business to Brexit preparedness.