Your Business and Preparing For Brexit

Last post: Nov 20, 2020

With the UK’s Withdrawal From The EU fast approaching, there's no better time to start thinking about what your business needs to do now and post 1st January 2021.

The Brexit Landscape

 
- Less than 50 days to the transition period ends
- It doesn't matter what kind of customs union is in place, or whether there is a free-trade agreement. After Brexit, "full customs declarations will be required….."
- Negotiations with EU about FTA is all about duty, not VAT or compliance related!!
- Business has this short period to address these VAT and compliance issues



Importing from and Exporting to the EU post 1 January 2021 (1)

 

New Border Operating Model for the control of imports and exports of goods between the EU and UK excluding Northern Ireland ('GB' or 'Great Britain')

    EXPORTS


  • Who will be the exporter of record for the goods leaving GB and responsible for the customs paperwork and export clearance, transport, insurance and other issues relating to the export. Incoterm per contract - DDU? Fiscal Representative/PVA/Incoterms (will come back to these)
  • Get your paperwork right to ensure exports are zero rated! Paperwork include sales invoice, customs declarations, bill of lading documents and transport documents
  • Who will complete the export declaration:
    YOURSELF: Will require the purchase of commercial declarations software which will enable you to complete your own declarations and file with the UK National Export System (NES).
    Apply to HMRC to register for NES and for a 'badge' for HMRC's online customs systems: CDS and CHIEF
    CUSTOMS INTERMEDIARY – recommended
  • Exit declaration requirements:
    Irrespective of who complete the export paperwork, you will need to compile the following information:
    - Commodity code
    - Departure point and destination
    - Consignee and consignor
    - Nature, amount and packaging of the goods
    - Transport method
    - Any certificates and licences (export license required for chemicals)


  • Customs export declaration submitted to NES which will then issue unique consignment number. This is required for the goods to be exported from GB and clear customs


  • Export from UK equal Import into EU!

    EU import processes must be completed to ensure your freight forwarder and transport provider will accept the shipment. If suppling on DDP this will be you. This includes:
    - Applying for an EU EORI number
    - Secure any necessary import licences
    - Completed EU customs import declarations for the EU member state of import, and this is filed with the relevant country's customs system
    - Apply for deferred VAT / Postponed VAT to ensure you do not have to pay import VAT

    If you are clearing the goods, consider an EU VAT registration with fiscal representative



    IMPORTS


  • Determine the Importer of Record i.e. who is responsible for the clearance requirements. This includes customs import declarations, import duties or tariffs and import VAT. Assume DAP for what follows.
  • Get a UK EORI - must be entered onto all UK customs declarations and similar paperwork. HMRC has already issued these to all UK VAT registered businesses with international trade. UK and EU businesses importing goods should apply to HMRC if they do not already have a number.
  • Import License Required?
  • Import VAT/Duty obligations
    You will need to plan how you wish to settle UK import duty. DAP will require use of a duty deferment account or pay on arrival.
    Defer the import VAT payment via postponed VAT accounting 
  • Defer your customs declarations to 1 July 2021?
    The UK is permitting importers to defer the completion of customs declarations and paying tariffs for most imports until 1 July 2021.
  • Decide how you will complete import declarations
    YOURSELF: Will require the purchase of commercial declarations software but get trained to use it! 
    Apply for a CHIEFS 'badge'. This is HRMC's import online registration system.
    CUSTOMS INTERMEDIARY – recommended
  • Calculate UK import tariffs
    Any goods coming into the UK will be subject to duty. The UK has published its proposed UK Global Tariff which provides levies by product – simplified with rounding down when compared to EU tariff. This will help you understand what payments are due, manage your cashflow and consider passing on the charge to your eventual customer.
  • Apply for a Duty Deferment account
    You will need a Duty Deferment account to allow you to postpone duty payments till the end of the month of importation. This is then settled by Direct Debit from your bank account. You may also use this for VAT if you wish to defer – this is an alternative to Postponed Accounting. HMRC is dropping the requirement for a comprehensive guarantee to enable more businesses to benefit.
  • Ensure your EU exporter is ready
    You will need to check that the EU exporter, if it is not you, is ready. This includes them having an EU EORI number, obtained any EU export licenses and submitted export declarations in the country of the goods' departure.
  • Moving the goods – paperwork and import taxes
    If you have deferred the customs declarations, you must first update your own import records ready for when you do complete the declarations (1 July 2021 deadline). Then complete the supplementary declaration – or have your customs intermediary do so.
    HMRC will debit your duty deferment account after your supplementary declaration has been received. Your VAT can be declared in your VAT return via Postponed Accounting.          If you are not UK VAT registered, then you will have to pay the duties to customs before they will release your goods.


      POSTPONED IMPORT VAT ACCOUNTING



 - Available to all VAT registered importers from 2300 hrs on 31st December 2020;
 - Not mandatory and no authorisation required:
             - Provide EORI and VAT registration number on customs declaration
 - No C79's if using PVA;
 - Declare and recover on VAT return; and
 - Review deferment account limit and guarantee amount as VAT no longer needs to be deferred.




    E-COMMERCE - DISTANCE SELLING B2C



 - As a third country from 1st January 2021, the UK is excluded from the Distance Selling simplification
 
01/01/20 - 30/06/20
  - Default is that customer will need to make arrangements to pay the import VAT before they can take delivery of the goods - not user friendly!

Options:
- Discuss whether their carriers are prepared to manage the importation into the EU od packages for EU consumers and potentially pay the import VAT; 

OR 

- Consider holding stock within the EU for the fulfilment of orders from EU consumer customers. This will require an EU VAT registration in the member state where the stock is located and potential distance selling registrations in other EU member states depending on the volume of sales. This may require the appointment of a tax representative.



Post 01/07/2020

Simplification established by EU - delayed by COVID19

- One stop shop (OSS)

For businesses which sell stock held in the EU to consumers, the one stop shop will allow them to use a VAT registration in a single member state to file a VAT return declaring and paying output VAT at the appropriate rates on sales to consumers in all 27 member states.

- Import one stop shop (IOSS)

For businesses selling stock from outside the EU to EU consumers, the IOSS will allow them to register for VAT in one member state and declare and pay output VAT on sales to consumers in all 27 member states.

- Digitised Services - Mini One Stop Shop (MOSS)
       
- Lose access on 31st December 2020
       - Register for non-union MOSS in one EU member state
       - €10,000 limit for registration
       - OSS from 1st July 2020 



    FISCAL REPRESENTATION



 - UK businesses and E-Commerce sellers may have to appoint a fiscal representative
 - Fiscal representation is a special type of VAT agent for foreign businesses who is responsible for reporting of VAT and is jointly and severally liable for VAT debts
 - Increased cost to doing business - Belgium being particularly aggressive
 - 19 of the 27 EU states require some form of fiscal representation



EU Transition New Rules: https://www.gov.uk/transition
- Importing goods into the UK
- Exporting goods for the UK
- Travelling to the EU
- Living and Working in the EU
- Staying in the UK if you are an EU citizen


Moving Goods between GB and Northern Ireland

GB/Northern Ireland Trade: https://www.gov.uk/guidance/trader-support-service




Article written by Gerry Myton, Partner & Head of Indirect Tax at Streets Chartered Accountants.


Gerry Myton leads Streets' indirect taxation team. He is skilled at mitigating VAT liabilities and identifying cash-saving opportunities from all stages of business development, from initial registration to business restructuring and trading internationally.
He began his career with Her Majesty's Revenue and Customs before moving into senior positions within UK Top 20 accountancy firms. He was a VAT Partner at Grant Thornton, PKF and MHA Macintyre Hudson.
Gerry is a specialist in a range of business sectors, notably retail, property and construction, international supply chains, e-commerce and import/export.
He has extensive experience assisting companies in navigating the complexities of VAT with particular emphasis on companies setting up and trading in the UK and from the UK into Europe.


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