What ‘no deal’ means for VAT and cus­toms

Belfast Telegraph - Business Telegraph - - News - Byleesquires, Di­rec­tor, Indi­rect­tax

On Oc­to­ber 22, the UK govern­ment pub­lished guid­ance to sup­port busi­nesses in the event the UK leaves the EU with­out a deal.

The guid­ance cov­ers the VAT and cus­toms duty treat­ment that will ap­ply to trad­ing with the EU in this sce­nario.

Given the real pos­si­bil­ity of a ‘no deal’ Brexit and the timescales needed to im­ple­ment new sys­tems, busi­nesses should take steps to plan for this now.

In a no-deal Brexit, the govern­ment will in­tro­duce post­poned ac­count­ing for im­port VAT on goods brought into the UK.

This means Vat-reg­is­tered busi­nesses im­port­ing goods from the EU will ac­count for the VAT due on their VAT re­turns (as they do at present) rather than pay­ing VAT when the goods ar­rive at the UK bor­der.

This avoids a sig­nif­i­cant cash flow cost for busi­ness.

This will also ap­ply to im­ports from non-eu coun­tries, in or­der to help busi­nesses make the most of global trad­ing op­por­tu­ni­ties.

How­ever, the EU is un­likely to re­cip­ro­cate this treat­ment, so EU cus­tomers of UK firms may still face a VAT cash flow dis­ad­van­tage.

Where a UK busi­ness sells goods to EU con­sumers, cur­rent ‘dis­tance sell­ing’ rules will no longer ap­ply, and the sup­plier will not need to charge VAT.

How­ever, the cus­tomer is likely to have to pay VAT and cus­toms duty on the im­port in their coun­try. Where over­seas com­pa­nies send parcels val­ued up to £135 to the UK, a new tech­nol­ogy-based so­lu­tion will al­low the over­seas busi­ness to reg­is­ter with HMRC and pay the VAT, so the cus­tomer does not need to do so.

Other im­me­di­ate VAT changes will af­fect busi­nesses that pro­vide dig­i­tal ser­vices to EU con­sumers and that claim re­funds of VAT in­curred in EU coun­tries.

Un­der no deal, the UK will be out­side the EU Cus­toms Union and im­ports of goods from the EU will be sub­ject to cus­toms duty and con­trols in the same way as im­ports from out­side the EU (and vice versa).

The UK will no longer ap­ply the EU’S Com­mon Cus­toms Tar­iff and will es­tab­lish its own UK trade tar­iff, mean­ing duty rates could dif­fer from cur­rent EU duty rates.

Busi­nesses im­port­ing and ex­port­ing will need to make im­port and ex­port dec­la­ra­tions, as ap­pro­pri­ate, for each con­sign­ment.

Com­pa­nies will need to fa­mil­iarise them­selves with com­plex cus­toms rules, in­clud­ing those re­lat­ing to clas­si­fi­ca­tion, valu­a­tion, ori­gin and the avail­abil­ity of re­liefs and cus­toms spe­cial pro­ce­dures which could mit­i­gate the im­pacts.

For firms trad­ing across the bor­der be­tween North­ern Ire­land and the Repub­lic of Ire­land, the govern­ment has said it will pro­vide an up­date on ap­pli­ca­ble cus­toms ar­range­ments in due course.

It also rec­om­mended that busi­nesses con­sider ad­vice from the Ir­ish govern­ment.

Busi­nesses should take steps now to plan for these po­ten­tial changes, con­sid­er­ing the im­pact on their sup­ply chains and cus­tomers, how they will deal with cus­toms for­mal­i­ties, changes to con­tracts, and steps they can take to mit­i­gate the im­pacts. Grant Thorn­ton (NI) LLP spe­cialises in au­dit, tax and ad­vi­sory ser­vices. For fur­ther in­for­ma­tion or ad­vice on Brexit-re­lated or VAT and in­di­rect tax is­sues, Lee Squires can be con­tacted at [email protected]


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