New Year – New VAT Rules for Call Off Stock
The UK has produced draft legislation to implement the EU VAT “Quick Fixes” to assist in simplifying trade across the EU. This change relates to dealing with the VAT treatment of “call off” stock.
It should be noted that HMRC have stated that there is no obligation for a business to change its arrangements to meet these new conditions for call off stock. The existing rules which cover the arrival of call off stock from an EU supplier into the UK are that it is the UK business customer that accounts for the acquisition VAT when the goods first arrive into the UK and before being called off.
However, where a UK business wishes to access this simplification for dealing with call off stock arrangements with its EU customers and ensure a VAT registration in another EU state is not triggered solely from engaging in this type of arrangement, then these regulations would need to be followed.
The actual UK legislation to implement the change will be included in the next Finance Act but would apply to goods removed from any EU country on or after the 1st January 2020. This will mean the legislation will have retrospective affect and taxpayers would have to correct their returns for the period from the 1st Jan 2020. Technically at this stage therefore businesses are being “invited to comply” but as the change will effectively apply from the 1st Jan 2020 it would make sense to review, understand and implement the change now.
Call off stock is the term used to described goods where the customer for the goods is known to the supplier at the time of the movement of the goods. This change in procedures would affect the movement of call off stock where the supplier is in a different EU state to the intended customer. The changes apply from the 1st Jan 2020 and would require a UK supplier to act in respect of:
- The nature of the records it retains to monitor call off stock
- The wording of contracts covering call off stock arrangements with its customers
- Verification of any triggers to a business establishment in an EU state
- Entries on the suppliers EU Sales List
- On-going monitoring of goods held under call off arrangements
- Changes created by a substitution of the original customer
The change is due to the past lack of harmonization of VAT rules governing call off stock treatment across the EU. This would often leave suppliers of goods exposed to a VAT registration in different EU states where their only activity there was with a business customer under a call off stock arrangement. Additional costs and administration being the result.
The supply of the goods from a business in the UK to a business customer in another EU state remains one on which no UK VAT should be chargeable. It’s a question of ensuring that you – as the UK based supplier – hold all of the required details to evidence and monitor goods under this call off arrangement and that all of the required conditions – such as the VAT registration of your business customer – are retained. There is also a new 12 month call off rule to adhere to as well.
For information on all the conditions that will apply an HMRC Guidance note has been issued and it is worth a thorough read to ensure your arrangements would be compliant. These will be the rules that the UK will follow to the end to December 2020 under the Brexit transition. We await the final agreement before we know the nature of our VAT relationship with other EU member states beyond that point.
Staying up to speed with VAT changes as the Brexit process moves forward will be important this year. The Centurion team are always here for when VAT gets complicated remember.
One practical suggestion is to have an “Inform and Plan” VAT session with us in the New Year on how these VAT regulations on movement of goods are managed by your business’s finance and logistics teams. This would ensure there is no exposure to VAT assessments where no VAT has been charged on the basis that you thought your systems and processes were compliant only to find at an HMRC visit that they are not.
It’s a recurring area of difficulty for exporters of goods and a preventative Exporting VAT Health-check on that area from our expert VAT team could save a lot of time, money and stress should you be faced with trying to rebut a costly assessment from HMRC.
To keep up to date on the VAT front do ensure you are registered to receive our VAT updates – you can do so on our website or use email@example.com stating “Opt in for VAT Updates”.