Philip Munn

Written by: Philip Munn

Philip Munn

Partner

Prepare for the worst: VAT

The buying and selling of goods with our EU trading partners has attracted the most attention in since the prospect of no-deal became all too real. For organisations that only trade with EU counterparties at present, obtaining a UK EORI number is the simplest but most important first step to prepare for Brexit

On 21 August, the Chancellor announced that HMRC will automatically allocate more than 88,000 VAT registered companies an EORI number to ensure that they can keep trading with customers and suppliers in the EU. Letters from HMRC will start arriving this month notifying businesses that they have been allocated an EORI number. If you don’t receive this letter but you think you may need an EORI we recommend that you act now.  

If you’re selling goods to EU business customers, we suggest you contact them now to verify who will be responsible for importing your goods into the EU in the event of a no-deal Brexit. These obligations are often agreed in the contract, but in the past such obligations would not have affected the VAT or duty obligations and so the detail may have been overlooked. It is now crucial to agree your plans to avoid unnecessary delays.

If you’re bringing goods into the UK from the EU you will have more customs declaration responsibilities. The key decision is whether you wish to take responsibility for these obligations or instruct an agent on your behalf.

Whether you sell services or goods to EU consumers Brexit may affect your VAT responsibilities. For service providers accounting for EU VAT using the Mini-One-Stop-Shop (MOSS) scheme now is the time to prepare to consider a shift to the non-EU scheme. If you sell goods and use the distance selling regime to account for local VAT these registrations will be terminated on the day of Brexit. By default, this means that local VAT and duty will be due from the buyer unless you can make alternate arrangements with your logistics company to streamline the process.

If you have EU VAT registrations but no presence in the EU, now is the time to check your requirements after Brexit. Many EU member states require non-EU taxpayers to abide by far tougher compliance requirements, including the appointment of a fiscal representative which can be very costly.

If you’re not registered in the EU but you are reclaiming EU VAT using the electronic refund mechanism speak to your adviser now; this may be the time to submit your claim before the rules change as the mechanism for non-EU companies is more onerous.

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