Liz Maher, Director at Centurion VAT and the expert team there have been keeping their eyes open for any VAT related developments and since her last update at the start of September, there’s clearly a range of issues to catch up on.
Centurion VAT is one of the member firms of the Xeinadin Group.
Where are we now?
With no sign of a further delay to the planned end of the transition and the 15th October deadline for an agreement now being passed, let’s take stock of what we know now. There is 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 have 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.
- A new “monthly statement” will exist to support import VAT claims.
All of this is starting to come into focus.
Find yourself a firm to act for you
What is really important is that businesses in the UK start to make decisions about the route for managing imports and exports that they are going to take. 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 the country – now is the time to identify that requirement and find yourself a firm to act for you in that capacity. Even 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 changes could take 2 months so it’s important to look at this now.
“Such changes could take 2 months so it’s important to look at this now.”Liz Maher, Director of Centurion VAT – A Xeinadin firm
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 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.
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 is starting, as we write, to lobby for the return of this scheme citing it as major support not just for their businesses but for the currently beleaguered tourism sector in our larger cities.
Centurion has also identified a worrying gap 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 1st 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 reviewed 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 we have been asking of HMRC and the Treasury – we await their response!
“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.”Liz Maher, Director of Centurion VAT – A Xeinadin firm
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 actually 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.
Centurion has 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 centurionvat.com. The next one is on the 4th of November at 10 am. 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.
“Therefore whilst our message is ‘Don’t Panic’ we would also say – ‘Please don’t start this review too late’.Liz Maher, Director of Centurion VAT – A Xeinadin firm
There will be some businesses, no doubt, that in trying to cope with the lockdown fallout from COVID, don’t 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 delays 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.
Centurion VAT is one of the member firms of the Xeinadin Group.
If you’d like to learn more of how we can help your business get Brexit VAT Ready or would like to register to receive our VAT updates, then please call us on 01633 415390 or email us at [email protected].
Liz Maher OBE
Director of Centurion VAT*
*Centurion VAT is a Xeinadin Group firm member.