What does the September 2020 Winter Economy Update mean for business owners? Will it help the Economy get back on track?
Brexit: VAT...are we getting closer to knowing what's next?
4 December 2020
The transition period immediately following the UK’s departure from the EU will come to an end in just over a month on 31st December. At that point, the UK will cease to be a member of the Single Market and Customs Union, and will no longer be a part of the EU VAT system. This has significant VAT and Duties implications for UK business involved in international supply chains, but we don’t quite know what they all are yet!
Issues associated with state aid and fishing rights look to present stumbling blocks to the conclusion of a trade deal before the end of the year and should the transition period end with no trade agreement in place, the UK will revert to World Trade Organisation (WTO) trading and customs terms.
What does that mean for the movement of goods?
The movement of goods between the UK and the EU will represent imports and exports in the same way as they do to the rest of the world. In principle, these will be subject to customs controls and taxes.
Central to the future relationship of firms exporting and importing between the UK and EU is an Economic Operators Registration and Identification (EORI) number. Every business will need one to transit goods between the UK and non-EU countries from 1st January, and may also need one if moving goods to or from Northern Ireland. It can take up to a week to register in some cases, but without one, there will be issues with clearing goods into the UK.
UK importers that bring goods in from outside the EU and then export them into the EU, will need to consider in detail the relationships between those geographies.
UK exporters to the EU will need to review the International Chamber of Commerce’s International Commercial Terms (incoterms) to ensure the customer receiving the goods is the importer of record, and to avoid a possible overseas VAT registration requirement.
Unusually the governments advice in this area is good and being kept up to date as matters evolve, the new bible for EU trade is the Boarder Operating Manual
What about the movement of Services?
There will be three different systems that e-commerce businesses will need to consider between now and July 2021, and these businesses must familiarise themselves with each system before they can decide how to declare their VAT.
One immediate change will be for UK suppliers currently taking advantage of the EU Mini One Stop Shop (MOSS) to account for certain VAT. From next year, such suppliers will need to change to the non-EU MOSS if they wish to avoid having to register for VAT in each Member State to which they supply digital services.
If you think you’ve got this under control – you’re probably underestimating it…
If you thought a free-trade deal meant less regulation – you’re probably wrong…
If you’re expecting less paperwork and confusion – you’re most definitely wrong!
The extent of these changes is unknown, however, preparation is key, so contact us to ensure you’re in the best position as possible.
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