If your business is established in the UK and trades with the EU, or if it is an EU business seeking to trade with the UK, then there are a number of issues, and subsequent actions, which should be considered to prepare for a no-deal Brexit.
Action 1: Review HMRC’s website to determine if there is guidance specific to your industry (relevant to all businesses)
The UK Tax Authority HM Revenue & Customs (HMRC) are releasing a vast amount of information in respect of Brexit. If a business wishes to explore this guidance to determine whether there are any industry specific actions which need to be taken, the following link here provides a resource to identify useful guidance. HMRC has also set out guidance which can be found here.
Action 2: Ensure that your business has an EORI Number (relevant to Importers and Exporters)
An Economic Operator Registration and Identification (“EORI”) Number will be required so that a business can make Import and Export Declarations.
Where a business trades goods with countries outside the EU, it is most likely to already have such a number.
HMRC has realised that take-up of such numbers was slow and so it has begun a process of auto-enrolling businesses with existing VAT registrations. However, if your business is not VAT-registered it may need an EORI number.
It is also understood that HMRC’s auto-enrolment process is only considering businesses which have completed their VAT returns to show that they have traded with the EU before 2018.
If your business is new or has not previously traded with the EU it may not automatically receive the number. In any case, it is recommended that if your business is VAT-registered that you check that it has an EORI number in place. More information can be found here.
Action 3: Classify Your Goods (relevant to importers and exporters)
Importers and exporters are required to determine the commodity code that applies to their goods. Commodity codes can be found from HMRC’s tariff here.
The tariff is usually the first step for businesses in determining the duty rate applicable to goods, whether import VAT will be due and whether the goods are ‘controlled’ goods or not.
If the goods are ‘controlled’ then the business may require a license to import or export the goods. Click here for generalised guidance in respect of when export licenses will be due.
HMRC has published some guidance in respect of temporary rates of duty applicable after a no-deal Brexit here.
In respect of some goods, such as foodstuffs, it may be that the labelling on the packaging will need to be changed.
Action 4: Decide who will make your customs declarations (relevant to importers and exporters who so far have only traded with the EU)
If goods enter or leave the UK, then either Import or Export Declarations will need to be made.
Businesses trading with countries outside the EU will already have considered this fundamental point. However, businesses which so far have only dealt with the EU may not have considered that determining this point is necessary.
Many businesses will use a freight forwarder to transport the goods they sell or buy. Freight forwarders will often complete relevant Customs Declarations. It may also be that they will have some insight as to whether goods imported into the EU will need to meet specific standards or require EU licensing.
If a business’s freight forwarder does not complete Import and Export Declarations, then it may be that customs agents can be hired to provide this service. For more information in respect of freight forwarders and customs agents, please click here.
Alternatively, a business might decide to complete its own Import and Export Declarations. HMRC provides further guidance for businesses that wish to do this here.
If a business does wish to complete its own Import and Export Declarations then it may benefit from a grant to enable it to train staff, information for which can be found here. It is worth noting that special software will be required to enable businesses to make their own declarations.
If the business is going to take its own goods to its customer by road then the following link may be helpful in highlighting the issues that the business will face, so please click here.
Action 5: Accounting for Import VAT on VAT returns (relevant to all Importing Businesses)
In the event of a no-deal Brexit, businesses will be able to account and pay ‘Import VAT’ on their VAT returns rather than at the port of entry.
This is likely to provide a cash flow advantage. HMRC provides further details on its website here.
This simplification will not apply to the import of parcels valued at less than £135 sent from overseas to the UK business’s ultimate customer.
Action 6: Consider whether any special customs procedures such as ‘Transitional Simplified Procedure’ may be beneficial (relevant to Importing Businesses)
Businesses should consider whether there are procedures that will make the importation of their goods easier.
In particular, businesses should be aware of the ‘Transitional Simplified Procedure’ or TSP. Information on the TSP can be found here.
This procedure will enable businesses to delay making full import declarations and paying duty enabling goods to enter the country quicker and assisting with a business’s cash flow.
Where goods are subject to duty the business in question will need to set up a deferment account here. Businesses seeking to use TSP will also need to use special software that links into HMRC’s systems.
HMRC also provides details of other special procedures which can be used here. If your business moves goods through or between community transit countries, such as Turkey or Switzerland, then you can use the Community Transit Convention here.
Action 7: Importation of parcels and goods sold from storage in the UK (relevant to Overseas Businesses)
If you are an overseas business selling goods in the UK, then you may need to seek advice in respect of UK VAT registration.
This would be the case in respect of sales made from premises in the UK and in respect of parcels which are sold directly to consumers in the UK which are valued at £135 or less.
Action 8: Consider whether the provision of digital services to EU customers will trigger the need for an EU VAT registration (relevant to UK businesses providing digital services)
Businesses providing electronic services to consumers living in EU Member States can currently use the Mini One Stop Shop (MOSS).
This is a simplification measure, which means that UK businesses do not have to register for VAT in EU member states.
This will be withdrawn following a no-deal Brexit with the result that UK businesses may have to register for MOSS in another EU member state. HMRC has commented on this on its website here.
Action 9: Claim refunds of VAT from other EU member states (relevant to UK businesses incurring EU VAT on business trips)
The manner in which UK businesses can claim back VAT from EU Tax Authorities will change after Brexit. Please find HMRC guidance on the manner in which claims can be made here.
Action 10: Seek advice in respect of complex EU supply chains
For most businesses seeking to import or export goods, the advice they will require may be best obtained from either a freight forwarder or a customs agent who will have the day-to-day knowledge of the manner in which declarations can be made and the customs procedures, which can be employed.
However, more in depth VAT advice may be required where supply chains are more complex. In the past, for example, EU simplifications existed where goods were sent from the UK to another EU country but sold to a customer in a third country.
The ‘Triangulation’ simplification will no longer exist post-Brexit, and thought may need to be given as to whether a UK business will need to register for VAT in another EU member state.
For more information please contact Julian Borley, Director of VAT.