Just in case a Brexit deal can’t be reached with the EU by 29 March 2019, HMRC has issued its first set of notes on the Customs & VAT implications. Surely this is evidence a ‘no deal’ is a real possibility.
Below is a summary of the key points that might affect you. You can find the government guidance here. And if you have any questions about any of the below, please get in touch with our VAT Head Honcho, Damian Shirley.
Our VAT system
You’ll be pleased to hear HMRC have confirmed that VAT will still exist post Brexit! Also, they’ve confirmed that the current UK legislation will remain in place. The VAT ‘place of supply’ rules will continue to apply in broadly the same way that they do now subject to some exceptions.
Possibly the most exciting news of all is EC sales lists will no longer be required meaning one less reporting requirement. Intrastat reporting requirements have not yet been confirmed.
Import VAT – potential cash flow issues.
The initial concern around whether businesses would have to pay import VAT on goods at the border and then reclaim on their VAT return has been removed.
Why? Because it’s the government’s intention to introduce a measure which means that UK VAT registered businesses importing goods into the UK will be able to account for import VAT on its VAT return, rather than paying import VAT on or soon after the goods arrive at the UK border.
Customs declarations and the payment of any other duties will still be required though. So, there’s still a potential cost to UK businesses importing depending on duty rates agreed.
Businesses that sell digital services to consumers in the EU will be able to register for the MOSS non-union scheme. If this might apply to your business, you may need to apply for a new registration post-Brexit.
These will still be claimable by UK business but as a non-member state business (13th directive claim rather than 8thdirective claim).
VAT deduction rules for UK businesses supplying insurance and financial services to the EU may be changed! It’s suggested this is to make it more appealing to financial institutions to stay in the UK.
Additional reporting requirements
Businesses will need to develop and expand their customs knowledge – particularly if you’ve only previously purchased/sold within the EU. You’ll need to consider which are the correct Incoterms to use and report.
Future tariff impacts
The MFN (most favoured nation) rates will be applicable for trade between the EU and the UK. However, the UK may choose to apply new duty rates that differ to the EU. The UK intends to continue offering unilateral preferences to developing countries and to transition all existing EU free trade agreements (FTAs). By omission, this means exporters using FTAs may lose the preferential treatment.
There are significant changes to export controls particularly around the licensing of dual-use goods. This may require businesses to reregister within both the EU and UK.
Trade between Northern Ireland and the Republic of Ireland
The UK Government states that it will be working on a solution with the EU, which hopefully means no hard border!
UK businesses will need to plan for customs and VAT processes in relation to exports to EU businesses, which will be checked at the EU border and subject to local country rules.
That’s it for now. As we mentioned above, if you have any questions about any of the below, please feel free to get in touch. You can also find the government guidance here.