Businesses trading with the EU need to prepare as much as possible and HMRC have drafted legislation for this event. We have set some detail out below. If you have any questions surrounding this please get in touch.
Trading with the EU:
If you are a business that currently trades only with the EU there are 3 important steps that HMRC have advised you take in order to continue your trade after 29 March 2019.
- Register for an EORI number
- Decide how to make customs declarations
- Check the information needed for safety and security declarations
The letter to UK traders that deal with the EU only is on GOV.UK here.
HMRC have published further information in their Partnership pack on GOV.UK.
Changes in legislation:
If the UK was to leave the EU without a deal, HMRC have advised that a number of statutory instruments (SI) will become effective:
1. Postponed accounting - Regulations have been prepared for ‘postponed accounting’ for imported goods from the EU and the rest of the world. The regulations will work in a similar way to acquisition VAT, i.e. output VAT due on imports will be declared, and input VAT claimable (subject to normal rules) will be reported in the same VAT period. Box 2 of the VAT return will change from ‘acquisition VAT’ to ‘postponed accounting VAT’.
Box 9 will change from net acquisitions to net imports subject to postponed accounting. This will address the cash flow effect of goods from the EU being treated as imports from exit day. If the UK does have a no-deal exit, this change to the VAT return requirements will have consequences for accounting software, which doesn’t currently capture import data to feed into these boxes.
2. Postal Packets - In the event of a no-deal Brexit, SI 2018/1376 will make overseas suppliers liable for import VAT on any consignment of goods worth up to £135 sent into the UK in a postal packet. The SI creates a registration and accounting scheme for suppliers, and provides for others to be jointly and severally liable for that import VAT in certain circumstances. It also removes Low Value Consignment Relief for commercial imports of goods valued at £15 or less
3. VAT fund management exemption after Brexit delayed until April 2020 - The Government has postponed the introduction of the VAT exemption for managing defined contribution pension schemes, which was to have extended the scope of the UK’s VAT fund management exemption in relation to pension funds with effect from Exit day, to bring it into line with EU law. The government’s intention is to give the industry more time to prepare by introducing the same changes in a new order but with a definite commencement date of 1 April 2020.
From 1 April 2020, UK law will provide for the VAT fund management exemption to apply to pension funds that meet certain criteria and will remove the requirement for certain funds to invest wholly or mainly in securities for the exemption to apply.
We are here to help with any aspects of VAT that, in the face of an uncertain Brexit, could have consequences for your business.