Brexit countdown ticks on – How Centurion VAT can help

Thank you very much for the excellent webinar this morning - really clear and focussed on the issues that matter to our company 

Julian Halton
Finance Leader  Premier Cables/ an IEWC Company

At Centurion as well as undertaking Brexit VAT Ready Reviews for clients we’ve been running a series of on-line sessions on the latest VAT related news and issues and it was great to get this feedback from a client who attended the second of our Brexit sessions yesterday and we’ve another one available for the 4^th November – details HERE. All types of organisations have joined these sessions from across the UK and the US and the feedback has been consistently great I am delighted to say. Accountants and Business advisory and Support Groups are welcome to link into these sessions for themselves and their clients.

At Centurion Andrea – who looks after our International Trade clients has been keeping her eyes open for any VAT related developments. This is a current update since by last post in September of where things have moved to now. There are clearly a range of issues to catch up on!

Where are we now?

With no sign of a further delay to the planned end of the transition and the 15^th October deadline for agreement now being passed we can take stock of what we know now. There are a range of details starting to fall into place:

• Information on how to account for Postponed Accounting VAT, on goods arriving from the EU, in which boxes of the VAT return this is recorded.

• We’ve the options available to businesses on how and when to account for VAT on the goods that they will be importing post 31 December 2020 from EU suppliers.

• There’s clarity on the fact that Intrastat’s will remain in place for Arrivals of Goods from the EU if not for Despatches.

• The Simplified Declarations route or full Declarations options for dealing with such imports is now clear and:

• A new “monthly statement” will exist to support import VAT claims.

All of this is starting to come into focus.

What is important is that businesses in the UK start to make decisions about the route for managing import and export declarations and the VAT issues attached to that. Comments have circulated from government teams to suggest that – due to the potential delays of getting VAT registrations in place across the EU – those affected businesses should look to apply now as a “just in case” action on getting a VAT registration set up in the EU. This registration could always be cancelled they argue.

Similarly the message is clear on appointing a fiscal representative in an EU state – should you think one will be a requirement to follow along with any VAT registration in country - now is the time to identify that requirement and find yourself a firm to act for you in that capacity.

If you already have an existing EU VAT registration number you should check whether this VAT number will change as you move to a Fiscal Representation VAT number – should that EU country require a fiscal representative to be appointed, that is. Such a change could take 2 months in itself, so it is important to look at this now.

Getting a Duty Deferment Account set up would normally be a straightforward matter to sort out with HMRC but if the expected volumes of applications are increasing, any delay in processing will ripple through to your normal business supply chain management which aims to deliver to your customers in a timely manner.

If you already have a Deferment Account can you benefit from a reduction in the financial guarantee that you need to set if you are using the postponed VAT route to account for your Import VAT? Another point worth a check.

Worry Points:

Businesses involved in selling goods to EU based individuals whether off their own websites or through their UK based shops should be aware of a significant change in the VAT accounting processes. The UK has announced that the UK VAT Retail Export Scheme will cease from the 1 January 2021. This will mean that should an overseas customer enter a shop to purchase goods they will have to pay UK VAT with no potential for that VAT being refunded as they leave the country. Certainly the luxury end of high street retailers are starting, as we write, to lobby for the return of this scheme, citing it as a major support not just for their businesses but for the currently beleaguered tourism sector in our larger cities.

Centurion has also identified a worrying lack of clarity in the VAT rules that apply to sales of goods online to private purchasers. Businesses in this area will recognise the phrase of “Distance Selling” which alludes to a set of rules that means a UK business charges UK VAT on sales of its goods to private EU customers up to a specific level of sales into each country. Once the Distance Selling threshold has been breached for the EU country of concern, then a VAT registration in that country is triggered and the VAT in force in that country is the tax that has to be charged and accounted for on such on-going sales.

Currently it is understood that the Distance Selling rules in the UK will cease at the end of December.

It had been planned that the EU would widen the use of the Mini One Stop Shop (MOSS) regime that applies to Digital Sales of Services to include goods, but with the advent of COVID that EU change has been deferred for 6 months. The question is therefore what happens to sales of goods by UK businesses in that 6 months window from the 1^st Jan 2021.

• Should the retailer set up VAT registrations in each affected EU country?
• Should it look at selling only through other online platforms who will take the responsibility to account for the VAT due on those sales?

These are fundamental questions to be reviewing in advance of the end of December.

It is also important to ensure you keep a focus on the continuing VAT news coming out of both the UK and the EU. Certainly, this is exactly the sort of question for clarification that Centurion has been asking of HMRC and the Treasury – we await their response!

Don’t Panic

Comments from UK politicians recently about businesses “putting their heads in the sand” over Brexit are – to put it mildly – a bit disingenuous in our view. It has always been a question of where to start and what information is there that we can rely on and plan for. However, the picture is starting to form, and actions can now be taken by any business that trades across the border with the EU to achieve the best position to be ready come January 2021.

As we've mentioned Centurion have been running Get VAT Ready for Brexit sessions online which have been attended by all types of organisations from universities, charities and manufacturers. These sessions will continue through the run up to B Day and can be booked at www.centurionvat.com The next one is on the 4^th November at 10am. We are also undertaking specific Brexit Ready reviews for individual clients to help them identify where the VAT risk will be in their supply chains.

Whilst our message is “Don’t Panic” we would also say – “Please don’t start this review too late”.

There will be some businesses, no doubt, that in trying to cope with the lockdown fallout from COVID, do not get to the Brexit Impact issues until the last minute. If too many are in the same position then undoubtedly delays in processing the appointment of fiscal representations, EU VAT registration applications, Deferment Accounts or finding Customs Agents will only add to problems on breaking into new EU markets or just being able to continue to trade with existing customers.

We all understand in business it’s more cost effective to retain the clients you have, rather than have to find new ones – so for that reason alone - now is the time to Get VAT Ready for Brexit and enable a smooth VAT transition.

Liz Maher and the VAT expert team at Centurion can be contacted at emailus@centurionvat.com – Wherever you are in the UK or the rest of the world technology means that our expert VAT support is only an email or call away. Centurion – your local VAT support team for when VAT gets complicated.

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