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BREXIT – VAT update – important information for businesses moving goods between the EU and the UK

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The UK will soon be leaving the European Union. While the details and timings of Brexit remain a topic of parliamentary debate, at this stage it appears the UK will leave one way or another. There is a high chance that the UK will be leaving the European Union without any transitional arrangements which you will have heard to as being described as a ‘no-deal’. As such, it is possible that a no-deal will cause significant disruption to trade that happens between the UK and the EU. As such, there could be significant repercussions to how your company and business operates VAT also. Within this brief, you will find important information in relation to how the VAT rules might change once the UK leaves the EU.

1) Will the UK VAT rules change?

At present, the UK VAT law is based on and derived from EU VAT law. Therefore, should the UK leave the EU without any transitional arrangements in place, this will mean that the UK will be essentially seen as an external country to the EU. Therefore, those previously well-established EU VAT rules would be no more. As such, various rules (such as distance selling and triangulation) may no longer be available which had previously been in place to simplify the VAT procedure and allow businesses and traders to potentially avoid VAT registrations in multiple countries across the EU. Therefore, it is hugely important for all traders within the EU to review their current supply chains to enable them to understand if VAT registration in the UK or possible other EU countries might be required if a no-deal outcome is realised.

2) Possible difficulties or more barriers for goods entering the UK

One of the biggest changes is that with a no-deal Brexit, with the UK leaving the European Union, this means that the UK will no longer be part of the EU Single Market and Customs Union. As such, all of these rules would cease to exist. Therefore, goods moving between the EU and the UK would no longer benefit from such free trade arrangements. This does highlight that there is a significant probability that these goods now leaving and entering the UK will be subject to import and export procedures at the time they arrive at the UK and/or EU ports and airports. This will potentially increase the administrative burden on the importer to check whether the goods are correctly documented, and any EU/UK customs authorities are notified, and all the applicable import VAT and custom duties are settled. To ease the possible risk of this, it is essential that for those businesses and traders who wish to continue to import and export out of the UK into the EU have both:
  • An active UK VAT registration in place
  • With the above valid UK VAT registration, there is an EORI number in place (EORI – Economic Operator Registration and Identification Number)
If a business wishes to continue to operate, but does not have these two items in place, there might be huge issues and difficulties to import and export goods.

3) What is the Transitional Simplified Procedure?

Given everything else going on, this is something that appears to have not been mentioned as much. However, there is a simplified transitional import and export system has been implemented by the UK Customs authority. This ensures the goods can be moved into and out of the UK with only a simplified level of documents being required. As such, it is vital for businesses to analysis their logistical and trading models that are being used at present to see whether they should also be signing up fort he Transitional Simplified Procedure (TSP) to ensure their EU trade movements remain as smooth as possible when the UK leaves the EU.

4) VAT Expense reclaim deadline

All businesses who wished to use the EU VAT refund electronic system in order to submit a refund claim for the 2018 year had to do so before 29 March 2019. Those businesses who have staff and employees that incur local VAT within the EU had up to 5pm on 29th March 2019 to ensure that any refund claims for 2018 were are submitted. Failure to have submitted a claim by this time does not necessarily mean the VAT refund will not be paid, but it does mean a potential delay and significant cost to have to deal with each country separately if there was a no-deal Brexit. All in all, there is still quite a lot of discussions going on within parliament and the EU regarding a successful negotiation for the UK’s transitional departure from the European Union however given the information we have to hand at present, it is important that you and your business takes action to plan ahead. Although HMRC has provided some guidance, a few useful flowcharts which they have provided.

Guide re importing – a no-deal Brexit

Guide re exporting – a no-deal Brexit

There are many unknowns regarding the UK and VAT law in this country once the UK leaves the EU. This brief just highlights some of the key areas that businesses who operate within the EU should be aware of. Sometimes the information provided can be confusing so if you would like to speak to a tax specialist, then please do not hesitate to contact one of our advisers on 020 8429 9245 or email [email protected].

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