VAT News

Brexit Update

13.02.2018

The EC issued a Notice to stakeholders dated 30 January 2018 confirming that the UK will leave the EU at the end of March 2019 and subject to the transition period, which is currently set to run until December 2020, the EU rules on VAT, customs and excise will no longer apply to the United Kingdom. There is no doubt that the changes will have a significant impact on how UK businesses trade with the EU in a VAT/Customs context potentially leading to commercial pressures on margins and increased administration/red tape. Because of the limited or lack of information coming from the UK Government/HMRC there remains uncertainty of what the actual position will be when we leave and things can still change but what we can say is that the EC notice is short but not necessarily sweet!       

The EC notice sets out the consequences of the UK’s withdrawal which is summarised below:

VAT

  • Goods which enter the EU from the UK or are shipped from the EU to the UK will respectively be treated as importation or exportation of goods which will result in import VAT being charged while exports will remain zero rated subject to holding the correct documentary proof of removal from the UK.
  • UK businesses wishing to use the Mini One-Stop Shop or MOSS for supplies of telecommunications, broadcasting or electronic services to non-business customers in the EU, will have to be registered for the MOSS in an EU country.
  • Businesses in the UK who purchase goods and services subject to VAT in an EU country who wish to claim a refund of that VAT will no longer be able to use the electronic EC VAT refund system but will need to submit a ‘13th Directive’ claim which is a manual submission in the language of the EU country to which the application is made.  
  • UK businesses carrying out transactions in an EU country may be required to designate a tax representative in that country as the person liable for payment of the VAT.

 

CUSTOMS  

  • Goods which are brought into the EU from the UK or to be taken out of the EU for transport to the UK will be subject to customs supervision and may be subject to customs controls. This suggests that customs formalities will apply, declarations have to be lodged and customs authorities may require guarantees for potential or existing customs debts.
  • Goods brought into the EU from the UK will be subject to the tariff and statistical nomenclature on the Common Customs Tariff which will result in the application of customs duties.  
  • Authorisations granting the status of Authorised Economic Operator (‘AEO’) and other authorisations for customs simplifications, issued by the UK will no longer be valid in the EU.
  • Goods originating in the UK that are incorporated in goods exported from the EU to third countries will no longer qualify as "EU content" which will affect the ability of EU exporters to cumulate with goods originating in the UK and may affect the applicability of preferential tariffs agreed by the EU with third countries.

 

If you would like to discuss any of the issues that the note above raises please contact Andrew Norris on 07950 694711