16th February 2021
Following the deal made with the EU, what is the difference for UK businesses selling goods to businesses in the EU post Brexit?
Although it was publicised that there would be no tariffs under the deal, this only applies to goods that comply with certain rules of origin (broadly speaking they are made from materials originating in the UK). Therefore, it is still important to check whether Customs Duty may apply to goods that are being sent to the EU, especially if UK businesses are importing components from outside the EU.
UK businesses will no longer have to report sales on an EC Sales List for goods sent to the EU.
What is the difference for UK businesses selling services to businesses in the EU post Brexit?
With the exception of certain services where the place of supply is covered by special rules (ie services relating to land, performances, and electronically supplied services), services will be treated as being exported services (or specified services with credit) which will be zero-rated for UK businesses. This will be of interest to Financial Services businesses in the UK trading with the EU as, post Brexit, some of their previously exempt services could qualify for VAT on associated costs to be recovered.
Is Intrastat and EC Sales List reporting still required?
If you were already submitting Intrastat forms, you will still need to submit arrival forms at least for 2021. However, you no longer need to submit dispatches forms for goods leaving the UK.
EC Sales Lists will not be required unless you are a business established in Northern Ireland, in which case special rules apply (see below).
How do I pay for UK VAT on imported goods from the EU?
If you are importing goods from the EU or the rest of the world, you should account for VAT using what is known as ‘postponed VAT accounting’ in your UK VAT returns. This means that you will not be required to pay import VAT in order to clear the goods when they enter the UK. You will need to obtain and use your UK EORI number for the importation and advise the shipping agent that you wish to use ‘postponed VAT accounting’.
Provided you are able to claim back VAT in full, it will simply form an accounting entry in your VAT returns. If you are partly exempt or otherwise unable to recover VAT in full, you would enter the amount of VAT in box 4 that you are entitled to claim.
What if you are involved in moving goods to and from Northern Ireland?
Due to the requirements of the Northern Ireland Protocol (the Protocol), Northern Ireland is in the unique position of still being part of the EU VAT system as well as the UK VAT system. Businesses will need to notify HMRC that they are trading goods covered by the Protocol and such businesses need to apply EU rules and use a special ‘XI’ VAT number prefix instead of GB for the movement of these goods.
Customs entries will be required when moving goods between the rest of the UK and Northern Ireland and the Government has set up a free Trader Support Service to help with this. Businesses will need to apply for a special ‘XI’ EORI code with HMRC to complete entries.
As a result of remaining within the EU, certain EU simplifications for VAT will still apply for some movements of goods involving Northern Ireland.
What overseas EU VAT registration issues may arise?
For the sale of goods delivered to the EU where it is the UK business who is responsible for the delivery to the recipient (ie delivery duty paid (DDP)), the UK business is responsible for the import VAT and Customs Duty that may arise when the goods enter into the EU member state concerned.
EU registration issues may also arise as a result of the UK losing access to a variety of EU simplifications that were in place before Brexit, these include the following:
- The loss of the call-off stock concession; any stock held overseas in an EU member state that is sold to a client would lead to a requirement to register for VAT.
- The loss of the supply and install simplification (and potentially other ‘land-related supplies’) could lead to a need to register in the EU state where the goods are installed (or where the land in the ‘land-related services’ is located).
- The loss of the triangulation simplification would lead to a need to register in another EU state, where you arrange for a supplier in one EU member state to deliver goods directly to a client in another EU state.
UK businesses can ask their client to be the importer in which case no UK VAT would be charged to the client, but the client would be responsible for import VAT and any duty (there shouldn’t be any under the terms of the deal for most goods, see above) when the goods reach the EU member state concerned (ie on DAP terms).
If UK businesses are selling goods to multiple EU member states, another option would be to obtain EU premises, register for VAT in that EU member state concerned, and to fulfil all EU orders from these premises to avoid having to register in multiple countries.
Non-UK businesses selling into the UK
What are the requirements for non-UK businesses selling goods to UK businesses?
If you are a business without an establishment in the UK, the VAT treatment will depend on who is responsible for the import of the goods into the UK. If your client is responsible for the import, they will be responsible for accounting for the import VAT on the importation and there will be no requirement for the non-UK business to register for UK VAT.
However, if the non-UK business is responsible for importing the goods into the UK, import VAT and Customs Duty will have to be paid by the non-UK business and it will be required to register for UK VAT and obtain a UK EORI number.
There is no requirement for non-UK businesses without an establishment in the UK to appoint a fiscal representative, but you must have an indirect UK customs agent who will be jointly and severally liable for any customs debts that may arise.
What has changed for non-UK businesses selling consignment stock in the UK?
As a result of the UK leaving the EU, the EU simplifications that were in place before Brexit for call-off stock are no longer in place. To the extent that any stock is held in the UK (for example, stock that is required at short notice for an ‘emergency’) would lead to a requirement to register for UK VAT.
If you are a business affected by the changes above and require any assistance with UK VAT registration or assistance in respect of EU B2B sales, we have a dedicated team of experts experienced in this area and would be pleased to help. We would be pleased to advise you further and can assist with VAT registration applications as well as any future compliance requirements. If you wish to discuss any aspect further, please contact Kamlesh Chauhan, Senior Manager, on 020 7969 5584 or via email at firstname.lastname@example.org.