31 October 2019
EU VAT – the four ‘quick fixes’ are effective 1 January 2020
As there has been an extension to the Brexit timescale, UK businesses may have to comply with the EU’s four ‘quick fixes’ to the VAT system. The quick fixes are effective from 1 January 2020 and intended to simplify the VAT treatment for specific business to business EU cross-border transactions. The legislation for the quick fixes are Council Directive (EU) 2018/1910 and Council Implementing Regulation (EU) 2018/1912. HMRC has not yet published guidance on the positon with the quick fixes and we will update the website when this information is available.
The four quick fixes are:
- Simplified treatment of call off stock
The simplification for suppliers not having to register locally where they hold call off stock, providing qualifying criteria is met, is extended to all member states.
- Uniform rules to simplify chain transactions
There may be changes for the intermediary in a chain transaction where they arrange the transport.
- Mandatory VAT registration number to zero-rate intra-EU sales of goods
Suppliers must ensure that the customer provides an EU VAT number in order to secure zero-rating and so that an EC Sales List can be completed.
- Simplified proof of intra-EU supplies
The EU has set out a simplified list of documents applicable to all member states. Taxpayers require at least two acceptable forms of evidence which are not contradictory and which are issued by independent parties.
More in depth detail on each of the quick fixes is provided in this Tax Adviser article.
17 October 2019
The UK and EU New Protocol on Ireland/Northern Ireland and Political Declaration
The Government published its New Protocol on Ireland/Northern Ireland and Political Declaration, which sets out the revised terms of the UK’s exit from the EU, with changes to the Northern Ireland Protocol to remove the ‘backstop’ and replace it with revised arrangements.
The new Political Declaration sets out the framework for the future relationship between the EU and the UK.
17 October 2019
Transitional Simplified Procedures - auto enrolment of qualifying VAT registered businesses
HMRC contacted the CIOT with the information below in respect of the auto-enrolment of businesses onto Transitional Simplified Procedures (TSP), which allow easements for importers. In a similar position to the auto-enrolment of businesses for an EORI, it is not possible to automatically enrol businesses who import goods but who are not already registered for VAT. Businesses without a VAT registration number must take proactive action to enrol for an EORI and TSP. Update: On 28 October, HMRC announced that there is a cancellation facility for TSP if a taxpayer has been auto-enrolled but did not wish to be, is no longer eligible to use TSP or no longer wants to be registered.
We are contacting you as a key partner in helping UK businesses prepare for Brexit.
HMRC has announced simplified import procedures called Transitional Simplified Procedures (TSP) that will come into effect when the UK leaves the EU on 31 October. For businesses new to customs processes this is the best option for them.
As you may be aware, on 15 October 2019 we announced we are in the process of writing to around ninety five thousand VAT registered businesses to notify them that they have been registered for TSP.
This population have been sent a letter (a copy is available via the link) to let them know that we have registered them for TSP.
TSP will allow them to import goods from the EU to the UK without having to make full customs declarations at the border or pay import duties they owe straight away.
To move goods from the EU into the UK using TSP they will need to:
- be established in the UK and meet the eligibility criteria
- keep records of their imports, and be prepared to make monthly supplementary declarations to HMRC
- check the tariff rates on imports to find out if there will be any customs duties to be paid
- apply for a Duty Deferment Account, which will allow them to pay duties owed on goods monthly rather than as soon as the goods enter the UK.
For more information about TSP and record keeping, go to www.gov.uk/hmrc/eu-simple-importing
If businesses are not VAT registered and they import goods, we recommend they apply for TSP.
Please share this opportunity with your networks. In particular we would appreciate your support in reaching smaller, non VAT registered businesses who may benefit from this scheme.”
30 September 2019
Temporary arrangement for advanced notification of VAT registration
HMRC contacted the CIOT with the following message:
“We would like to update you on our position relating to VAT registration for those businesses making preparations should the UK leave the EU without a deal.
We recognise that it is important to certain UK businesses and their supply chains that EU businesses are VAT registered in the event of no deal being reached however, this needs to be balanced against the risks involved in permitting VAT registration to businesses when they do not currently meet the requirements. We have updated our processes to allow businesses to submit advanced notification of VAT registration with the effective date being 1 November 2019. This will help businesses prepare should the UK leave EU without a deal and facilitates trade with as little disruption as possible.
From 27 September, EU businesses will be able to submit advanced notification of UK VAT registration where it is necessary for them to do so. VAT notice 700/1 has been updated to include specific guidance relating to the information that a business must include to ensure their notification is approved. A VAT number will be issued but it will not be active until the UK leaves the EU without a deal. In the event the UK reaches an agreement with the EU to leave with a deal in place, then these registrations will be cancelled as they will be no longer required.“
13 September 2019
Brexit Business Readiness Events around the UK
The government has announced that it will be holding local Brexit Business Readiness Events around the UK. The first event takes place on 16 September in Northampton.
9 September 2019
HM Government publish ‘EORI Mythbuster’ guidance
The Government has published further guidance about EORI (Economic Operator Registration and Identification) numbers. The guidance provides more information for UK and EU businesses including:
- How to apply for an EORI
- Whether you need just a GB EORI or both a GB and EU EORI
- Guidance for unregistered businesses, those with an existing EU EORI and newly registered businesses
- Trading between Northern Ireland and Ireland (including controlled and licensed goods)
21 August 2019
Preparations for a no-deal Brexit: Economic Operator Registration and Identification number (’EORI’) auto-enrolment for VAT registered businesses
HMRC has written to 88,000 VAT registered businesses to confirm that they have been auto-enrolled for an EORI number, the first step for continuing to trade in goods with EU counties should the UK leave the EU on no-deal exit terms. An EORI number is required for customs declarations when goods are imported or exported. HMRC published the auto-enrolment EORI number letter templates on gov.uk, which set out further no-deal Brexit preparatory steps for importers and exporters.
There are an estimated 100,000 businesses not registered for VAT that are currently trading in goods in the EU and these too will need to obtain an EORI number. Unregistered businesses need to apply via gov.uk. It is not necessary to be registered for VAT to obtain an EORI. Tax agents with affected clients can check that these businesses are aware of the no-deal preparatory steps.
The CIOT is in correspondence with HMRC about raising awareness of obtaining an EORI number and the additional preparatory steps for taxpayers trading in goods with EU suppliers and customers. HMRC also publish a trader checklist, titled ‘Get ready for when the UK leaves the EU’.
7 August 2019
Government says UK will leave the EU on 31 October 2019
The Government has said that the UK will be leaving the EU on 31 October whatever the circumstances. Over the coming weeks, HMRC will be communicating to businesses in the UK to inform them of actions they should take to prepare to leave the EU without a deal on 31 October.
Initially HMRC will be asking businesses to:
- Check the guidance the Government has published about the changes that will affect them.
- Stay up to date with important new information by signing up to HMRC’s EU Exit alert service.
- Engage with their business representative organisations
1 May 2019
VAT registration for EU businesses with ‘intending traders’ status preparing for a ‘no-deal’ Brexit outcome
The CIOT contacted HMRC to raise the difficulties encountered by EU businesses preparing for a ‘no-deal’ outcome, by applying for VAT registration in the UK as an ‘intending trader’, effective from Brexit date. This arises where the EU VAT simplification that relieves the current obligation to be registered in the UK is no longer available and the EU supplier will become responsible for accounting for VAT in the UK. HMRC responded as follows:
‘Businesses in the position you have described can register for VAT using the Advanced Notification facility, by registering online requesting a voluntary registration from an advanced date of 1 November 2019. In the ‘business activity’ section they should enter trade class/SIC code 99000 European Community. In the free text box they should describe accurately what the business does and ensure there is a positive amount entered in the ‘taxable turnover in the next 12 months’ box. If this is not done the application will be rejected. This information will enable the VAT Registration Team (VRT) to identify and actively manage any registration that is conditional on the UK leaving the EU without a deal.
If there is a change to the date of withdrawal from the EU, the VRT will amend the Advanced Notification date to match this new date. If the UK enters a transitional period or agrees a deal with the EU that allows current arrangements to continue then the registration will be cancelled. The approval of an Advanced Notification registration in these circumstances is only made as a contingency for the UK leaving the EU without a deal and the VAT number may not be used unless that happens. The business will receive an automated notification of an Advanced Notification VAT Registration and the VRT may follow this up with a manual letter to further explain the conditions and both.
With the UK having agreed an extension to the date of withdrawal from the EU, we would not expect businesses to use this facility until closer to the 1st November.’
12 March 2019
Legal Opinion on Joint Instrument and Unilateral Declaration concerning the Withdrawal Agreement
The Attorney General wrote to the Prime Minister setting out his legal opinion on the Joint Instrument and Unilateral Declaration concerning the Withdrawal Agreement.
6 March 2019
GOV.UK released an update on import VAT if there is no deal. It sets out how to account for import VAT and recover input tax under postponed accounting, and also contains a summary of the changes to four boxes on the VAT return:
Accounting for import VAT
If you’re a VAT-registered business find out how to account for import VAT on all goods brought into the UK if the UK leaves the EU with no deal.
HMRC further reminders and information on no deal Brexit
HMRC have asked us to share the following information which has been provided to help businesses prepare for the possibility of the UK leaving the EU without a deal. Originally this was for the 29 March 2019 deadline, which has subsequently been extended to 31 October 2019. The UK may leave before this date if the withdrawal agreement is ratified by the UK and the EU, in which case a transitional period will apply and the current VAT, duty and excise rules would remain in place until an agreed future date, which should be no later than 31 December 2020.
Actions to take
First, any trader who trades with the EU will need to register for an UK Economic Operator Registration and Identification (EORI) number. UK traders will need one to continue trading with the EU. You can register for one here.
Those appointing a customs agent should do this as soon as possible. If you’re not, and you intend to import or export regularly, you should:
- Ensure someone in your business is trained to make customs declarations.
- Buy specialist software that links to HMRC’s customs systems
- If you’re exporting, register for the National Export System
Making importing easier
The government also announced steps to make importing from the EU easier in the immediate aftermath of the UK’s departure. For at least 15 months after we exit, the Transitional Simplified Procedures (TSP) will allow businesses to import from the EU without having to make a full customs declaration at the border, and will be able to postpone paying any import duties.
You can register for TSP here. You need an EORI number to be able to do so.
Another measure to give businesses more time to prepare for a possible no deal EU Exit are the government’s plans to phase in Entry Summary Declarations. Currently Entry Summary Declarations, containing Safety and Security information, are not required when importing goods from the EU, but this will change if the UK leaves without a deal.
HMRC have decided that for the first 6 months, declarations won’t be required. They will continue to apply for trade from the rest of the world. After 6 months, carriers will be legally responsible for ensuring Entry Summary Declarations are submitted pre-arrival to HMRC at the time specified by mode of transport.
Common Transit Convention (CTC)
CTC allows goods to move between the UK, EU countries and other CTC countries under “duty suspension”, meaning that duty does not need to be paid until goods arrive at their final destination.
The benefits to businesses include cash flow benefits and keeping movement of goods flowing quickly. Under CTC, movements must:
- Start from an ‘office of departure’, (a government office), or at your own or an agent’s premises if you or they are an authorised consignor.
- Pass through an ‘office of transit’ to record the entry into the new country when the goods cross into a new customs territory (ie. the first entry in to the UK from a CTC country).
- End at an ‘office of destination’, (a government office), or at your own or an agent’s premises, if you or they are an authorised consignee. You must then enter the goods into another customs procedure, or into free circulation.
Offices of Destination and Departure are likely to be extremely busy in the event of a No Deal exit from the EU. You should consider finding an authorised consignor/consignee or applying to become one.
More information on CTC can be found here.
You may know the government announced an £8 million investment in training and increased automation to support the customs intermediaries sector.
Part of this investment, a £5 million grant scheme, opened in December 2018 to provide funding for customs intermediaries and traders who complete customs declarations.
So far more than £2 million has been requested. If you are yet to apply, we would encourage you to submit your applications soon. In particular we would like to encourage applications from traders and intermediaries looking for grants towards funding the cost of training their staff. Further information on the grant scheme can be found on GOV.UK.
The remaining £3 million is being invested to increase training provision in this area. This includes the development of a new modular training course, which is now available. The course, developed by e-learning specialists Brightwave in collaboration with key industry partners, has been specifically designed to develop the skills needed to complete customs declarations accurately and efficiently.
More information on this new course is available on the website. This includes details of what the course covers, as well as directing prospective learners to the five organisations who are delivering the training over coming months so they can choose the option that is right for them.
Finally, a reminder that the latest edition of the Partnership Pack has a number of communications resources for you to share with your clients to help them prepare for EU Exit.