The transition period for the UK to leave the EU formally ends on 31 December 2020, and (at the time of writing) a free trade deal had yet to be agreed.
Here, Optimum guest blogger and VAT expert Terry Dockley, of Terry Dockley & Co, looks at the implications for businesses and offers some expert advice and insight into steps that should be taken.
While we all have plenty going on, this is an issue that will not go away by burying your head in the sand. As is usual when dealing with tax, a proactive and pre-emptive approach will be less stressful than having a reactive approach when something has gone wrong.
Don’t think that nothing will happen if Boris Johnson and Ursula van der Leyen do not reach agreement on a Free Trade deal. Whether or not a deal is reached, the UK’s VAT status in relation to doing business with EU countries will change.
In addition, now the UK Government has withdrawn certain clauses from the Internal Market Bill, the Northern Ireland Protocol will go ahead. That means that Northern Ireland (“NI”) will not be treated exactly like the other parts of the UK in relation to VAT on supplies of goods.
Here are my 14 tips for being prepared:
- Do talk to your accountant or VAT adviser as soon as possible about how the VAT changes will affect the particular circumstances of how you do business with suppliers or customers in the EU.
- Don’t rely on the guidance in gov.uk as it is very general.
- Don’t leave asking for advice until Christmas Eve or New Year’s Eve. There may well be arrangements you need to put in place and applications that you need to take into account.
- Do make sure you have your GB EORI number ready and your XI EORI number if any of your transactions fall within the Northern Ireland Protocol. Remember, it is not just businesses that are based in NI that fall under the Protocol. You will fall under the Protocol if you have goods that are located in NI when you sell them, if as a business you receive goods in NI from EU businesses, or if you sell or move goods from NI to a country within the EU.
- Don’t forget that a UK EORI number will no longer be an EU EORI number from 1 January 2021. If you also need an EU EORI number because you import goods into an EU country after that date, then you will need to apply for one from one of the 27 remaining EU countries.
- Don’t listen to anyone who tells you that you need a VAT deferment number if you are importing goods into the UK, unless they give you very good reasons for why postponed VAT accounting won’t apply to you. If you can use postponed accounting, you should never pay UK import VAT unless you are partly exempt.
- Don’t forget, if you are registered under the MOSS scheme in the UK, then you must apply to be registered in the non-Union MOSS scheme in an EU country. If you don’t, you will have to register in every EU country where you sell digitised services to private customers.
- Do be clear about the VAT consequences of your Incoterms. If you become the importer of record in any EU country to which you export goods, you will need to register in that country and you may have to appoint a fiscal representative.
- Do review your VAT arrangements if you make distance sales to private consumers in EU countries. You will become the importer of record for these goods and will have to register in any EU country where this applies. This is the case whether you currently charge UK VAT or are registered as a distance seller in the other country.
- Do stop doing EC Sales Lists unless you are selling goods from Northern Ireland to an EU country.
- Do stop doing intrastat supplementary declarations for dispatches (goods sent to the EU) unless the goods are going from NI to the EU, in which case you must continue to do so for the duration of the NI Protocol.
- Don’t stop doing intrastat supplementary declarations for arrivals until 31 December 2021 if you are already doing them or go over the limit (£1.5M) in 2021. Yes, I did say 2021. If you are importing goods into NI from the EU in excess of the limit you must continue to make these declarations for the duration of the NI Protocol.
- Do familiarise yourself with the rules for evidence of export, which are different from those for evidence of removal from one EU country to another.
- Do review your arrangements if you use the simplifications for triangulation or call-off stock. Registration in another country may again be necessary.
Complicated? Certainly. Likely to catch some businesses out? Most definitely. As Terry says in his first point, it would be wise to seek advice from your accountant – such as the Swindon accountants here at Optimum – or a VAT expert such as a Terry.