WHO WILL BE AFFECTED?

All businesses that export goods from Great Britain from 1 January 2021 onwards.

NEW RULES FOR EXPORTING GOODS

EORI number – Economic Originator Registration Identification

You are required to have an EORI number to move goods from Great Britain to non-EU countries currently. From 1 January 2021 you will require an EORI number to move goods from Great Britain to EU countries. This number must start with GB, followed by your business VAT number (if registered) and usually three zeros.

If you have not done so already apply for an EORI number as soon as possible. It can take up to a week to get one.

To apply you will need your:

• VAT number and effective date of registration – found on your VAT registration certificate
• National Insurance number – if you are an individual or a sole trader
• Unique Taxpayer Reference (UTR) – found on correspondence from HMRC
• Business start date and Standard Industrial Classification (SIC) code – found at Companies House
• Government Gateway user ID and password

See: https://www.gov.uk/eori

Customs declarations

From 1 January 2021, you will need to make customs declarations when exporting goods to the EU. These rules currently apply to exporting goods to the rest of the world.

You can make the declarations yourself or hire someone else such as a courier, freight forwarder or customs agent. Most businesses use a third party or specialist agent to do this. This is because you will need compatible software and certain detailed knowledge as the declarations can be complicated. If you would like more detailed guidance on how to make declarations yourself please see https://www.gov.uk/guidance/customs-declarations-for-goods-taken-out-of-the-eu.

If you decide to hire a business to deal with customs on your behalf they must be based in the UK. They will typically:

• Check the classification and valuation of your goods, and make sure you use the right commodity codes
• Liaise with government agencies and customs authorities on your behalf
• Advise on any necessary licenses for export of restricted or hazardous goods
• Prepare and submit documents which have to be filed to clear customs processes

See: https://www.gov.uk/guidance/appoint-someone-to-deal-with-customs-on-your-behalf for further information.

Where goods are exported with a value of less than £873 full export documentation is not required, you should obtain and keep a certificate of posting to support the VAT zero-rating of your supply. You must complete and fix a custom declaration (CN22, CN23 or a Parcelforce Worldwide Despatch Pack incorporating the CN23) which can be obtained from the Post Office. An invoice should also accompany the package. You will not need an EORI number.

It is also worth noting that from 1 January 2021 the rules for exporting certain types of goods are changing. You may need further export licences or labelling for example. To check the rules visit https://www.gov.uk/prepare-to-export-from-great-britain-from-january-2021 for more information.

VAT on Goods

Currently businesses selling and delivering goods to EU consumers may have to register for VAT in multiple EU member states under distance selling rules (see https://www.gov.uk/online-and-distance-selling-for-businesses). From 1 January 2021 these rules will no longer apply and all exports to EU consumers will be zero-rated exports.

Goods can be sent as a direct export, where you send the goods outside of the UK or are responsible for arranging transport yourself or appointing a freight agent. The goods can be exported by any of the following:

• In your baggage
• In your own transport
• By rail, post or courier service
• By a shipping line, airline or freight forwarder employed by you

Goods may be sent as an indirect export, the customer (based outside the UK) or their agents collects or arranges the collection of goods from you.

A zero rated supply is one which is subject to VAT but where the VAT is at 0%. You must meet certain conditions before you can zero rate the goods. These conditions cover:

• Evidence (either official or commercial) you must hold to prove entitlement to zero rating
• Time limits in which the goods must be physically exported from the UK
• Time limits in which you must obtain evidence of export

For each condition there is different evidence required for direct and indirect exports. For further information on zero rating and the conditions which must be met please see https://www.gov.uk/guidance/vat-on-goods-exported-from-the-uk-notice-703 (the guidance still refers to outside the UK or EU, please ignore any mention of EU and follow the guidance for all exports out of Great Britain).

When the goods arrive in the destination country they may be subject to import VAT and duty, therefore you may to make your customer aware that import VAT will be payable on top of the purchase price. There is currently a low consignment relief for goods with a value of less than €22 which exempts the goods from import VAT and duty. This limit will be removed from 1 July 2021 (was planned for January 2021 but has been delayed due to Covid-19). If goods are sold between January 2021 to June 2021 and are valued at €22 or less they will be exempt from VAT and duty. For a value of more than €22 import duty and VAT will be payable.

From 1 July 2021 you can opt to charge VAT at the point of sale rather than the customer paying import VAT if the goods are valued at less than €150 which should assist in avoiding delays of the customer receiving the goods. In order to do this you will be able to register in one EU member state for the Import One Stop Shop. Import VAT will then be payable at the VAT rate of the customers member state. There will be one VAT return that will contain sales made to all EU countries and will be submitted in the member state where the registration was made. Consider the language of the country where registration takes place as forms will likely be in this language and the possibility of appointing a fiscal representative (a local entity that represents a foreign trader for VAT purposes).

In certain circumstances EU marketplaces facilitating sales to EU consumers (such as Amazon) will be responsible for the VAT on the suppliers behalf, the VAT will be taken care of at the point of sale by the provider.

Retail Scheme

The retail export scheme (where sales made to non-EU visitors could be zero rated) will no longer be available from 1 January 2021. Sales made to visitors can be zero-rated if the UK business arranges transport/delivery to an address outside the UK or visitors will have to pay UK VAT on the purchase to take it away with them.

If you have any questions in relation to export rules after 1 January 2021 please contact Yvonne Collings on [email protected] or call 01243 782 423!

Alternatively you can head to our contact form, plus we have our Brexit Help Centre with the latest updates.

It is expected that the place of supply rules for services will remain broadly the same following Brexit…

Business to Business (B2B) supplies

Generally for a business to business (B2B) supply of services the place of supply is where the customer belongs and so the customer needs to account for VAT at their local rate on their VAT return (the reverse charge). No UK VAT is charged on the sales and it is treated as outside the scope of UK VAT.

To determine if the supply is being made to a business they should provide their VAT number, it will still be best practice to quote the customer VAT number on the invoice as this is the best evidence of a B2B supply. If they are unable to provide a VAT number you can accept other evidence of business status, for example a link to their website or other commercial documents. It is your decision to accept alternative evidence, if it is not accepted then the sale must be treated as a sale to an individual, business to consumer  (B2C)

For sales made from 1 January 2021 onwards there will no longer be a need to complete an EC Sales List when providing services from the UK to a business in an EU member Country (see our previous blog here)

Buying services from an EU supplier

When buying services from an supplier based in the EU or the rest of the world the purchase comes under the reverse charge, you account for both the input and output VAT on your VAT return. This should remain the same following Brexit.

Business to Consumer (B2C) supplies

Currently when services are provided to individuals in an EU member state from a UK VAT registered business the place of supply is deemed to be where the seller is based. This means that when providing services from a UK business to an individual in France for example, UK VAT would be charged.

For services provided to non-EU individuals the place of supply is the country where the customer is based and therefore is outside the scope of UK VAT, so no VAT is charged.

After Brexit it is expected that the sale of services to individuals based in the EU will follow the same treatment which is currently in place for non-EU individuals, the sale will be outside the scope and no VAT will be charged.

As is usual with VAT there are exceptions to the general rules above, examples of these are services connected to land and admissions to events, which may create an obligation to register for VAT in an EU Member State. Further information on special rules for services can be found on www.gov.uk/guidance/vat-place-of-supply-of-services-notice-741.

From 1 January use and enjoyment rules may be subject to review. At the moment these rules are intended to make sure taxation takes place where services are consumed and allow for a supply to become subject to UK VAT when under normal rules they would be outside the scope. Use and enjoyment is only a consideration when certain services made by a UK provider are consumed outside the EC or those services when supplied by a non-EC provider are consumed in the UK. After Brexit the rules will apply to outside the UK rather than outside the EC. These services are:

• Telecommunication services
• Broadcasting services
• Electronically supplies services (for B2B)
• Hires goods
• Hired means of transport
• Insurance repair services

For further information see www.gov.uk/hmrc-internal-manuals/vat-place-of-supply-services.

Supplying Digital Services

For businesses who provide digital services to individuals in EU countries further information regarding the end of the UK MOSS scheme is available here: https://www.lewisbrownlee.co.uk/changes-coming-for-sales-made-to-eu-member-countries/ 

If you have any questions or need any assistance with your VAT please contact Yvonne Collings on 01243 782 423 or email [email protected].

Alternatively you can head to our contact form, pus we have our Brexit Help Centre with the latest updates.

Who will be affected?

All businesses that import goods into the UK from 1 January 2021 onwards.

New rules for importing goods

EORI Number – Economic Originator Registration Identification

You are required to have an EORI number to move goods between the UK and non-EU countries. From 1 January 2021, you will require an EORI number to move goods between Great Britain and the EU.   This number must start GB, be followed by your businesses VAT number (if registered) and usually 3 zeros.

If you have not done so already apply for an EORI number as soon as possible. It can take up to a week to get one.

To apply you will need your:

• VAT number and effective date of registration -found on your VAT registration certificate
• National Insurance number – if you’re an individual or a sole trader
• Unique Taxpayer Reference (UTR) – found on correspondence form HMRC
• business start date and Standard Industrial Classification (SIC) code -found at Companies House
• Government Gateway user ID and password

See: https://www.gov.uk/eori

Customs Declarations

From 1 January 2021 you will need to make a customs declaration when importing goods from the EU, as you would currently when importing from outside the EU.  It is possible to make these declarations yourself but most businesses use a third party or specialist agent to do this. This is because you will need compatible software and certain detailed knowledge of the system including correctly identifying the commodity code. Any errors in the declaration can lead to significant delays on imports. If you hire someone to deal with customs for you, they’ll need to be established in the UK.

For more detailed guidance on the types of businesses  you could use to assist you with importing please see HMRC guidance https://www.gov.uk/guidance/appoint-someone-to-deal-with-customs-on-your-behalf

It is also worth noting that from 1 January 2021 the rules for importing certain types of goods are changing.  You may need further import licences or labelling for example. To check the rules, visit the gov website for further information.

Customs Duties and VAT

You need to pay customs duties (tariffs) and VAT on all imports. VAT will be applied on most goods at 20% on the duty inclusive price. Further detail on UK trade tariffs can be found here https://www.gov.uk/check-tariffs-1-january-2021

Import VAT and Postponed accounting

This may be the biggest change for some businesses registered for VAT as it is likely to lead to cash flow advantages for some currently importing from non-EU countries. From 1 January 2021 all Import VAT will be dealt with via postponed accounting for all goods brought into the country.  The importer based in Great Britain will treat itself as both the supplier and recipient of the relevant goods on the same return, meaning there is no physical cash outflow.

An online monthly statement from HMRC will be available for businesses to download and retain. It will show the total import VAT postponed for the previous month. The figure from the relevant monthly statements should be included on the next monthly or quarterly VAT return.

Box 1 – Total VAT due in this period on imports accounted for through postponed VAT accounting.

Box 4 – Total VAT reclaimed in this period on imports accounted for through postponed VAT accounting.

Box 7 – Total value of all imports of goods included on your online monthly statement, excluding any VAT.

Note the normal rules on what VAT can be reclaimed as input tax will still apply, so if you are partially exempt for VAT purposes there will be a net cash outflow.

A business does not need to be authorised to account for import VAT on its VAT Return and can start doing so from 1 January 2021. It can account for import VAT as described above if:

• the goods are for use in its business;
• the business includes its EORI number, which starts ‘GB’ on its customs declaration; and
• the business includes its VAT registration number on its customs declaration, where needed.

If goods are initially entered into a Customs special procedure, the business can account for import VAT on its VAT Return for the period when the declaration that releases those goods into free circulation is submitted.

Different rules may apply to goods in consignment not exceeding £135.

The guidance confirms that business-to-business sales not exceeding £135 in value will also be subject to the new rules. However, where the business customer is VAT registered and provides its registration number to the seller, the VAT will be accounted for by the customer by means of a reverse charge.

The above information is based on information currently available and on a no deal Brexit situation.

Further guidance can also be found by visiting: 

• https://www.gov.uk/transition
• https://www.gov.uk/guidance/help-and-support-if-your-business-trades-with-the-eu

If you have any questions or concerns in relation to the rules on importing after 1 January 2021 please contact Jayne Tressler or Yvonne Collings as soon as possible to discuss.  Time is running out.

You can call us on 01243 782 423 or head to our contact form.  You can also head to our Brexit Help Centre for our latest updates.