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Changes to indirect tax
Do businesses need to adapt their supply chains for Brexit?
- Where goods are involved, act now to review supply chains
- Plan for a worst case scenario, where a hard border will exist on 1 January, resulting in formal import/export declarations between the UK and EU
- Within contracts, review of customer and supplier delivery terms is essential
- Where importing, who will be importer of record and responsible for import VAT and duty
- Will UK customers push back on EU suppliers wanting DDP terms. We have already seen examples of this with large UK retailers insisting on DDP terms, resulting in implications for the supplier
- If importing to the UK for onward EU distribution, import VAT and duty may be payable twice
- Is direct import into another EU Member State preferable and can this be done if not established in the EU
- Is a local VAT registration, EORI, warehouse or local entity required and must fiscal representation be considered
- When exporting, consider what the delivery terms will be in the EU Member State of destination and who is importer of record there
- It is likely that distance selling from the UK will go and there will also be changes to Low Value Consignment Relief, meaning payment of import VAT and duty on most deliveries
- If making B2C sales, is import VAT and duty factored into the advertised price and can a freight forwarder be used to clear the goods and pay all charges on behalf of the customer
- Again, would an EU Member State presence be an advantage
- Plan by mapping supply chains, estimating increases in import VAT, duty and administrative costs and review HMRC guidance, for example, the Border Operating Model (BOM)
- HMRC grants are also available for training and IT
How might local indirect tax rules differ across the EU Member States following Brexit?
- The BBC recently reported that, following a study, many UK businesses exporting to Europe, will need to set up a presence in the EU, however, how this is done and the level of representation required, may result in barriers to overcome
- EU Member States have differing rules as to whether local VAT registrations and EORI numbers can be obtained if non-established
- Fiscal representation may be required, potentially resulting in the requirement for guarantees or joint and several liability with a local forwarder
- This may influence the country of choice when reviewing supply chains
- Most EU countries allow a VAT registration and EORI without an establishment, Germany and Italy being notable exceptions, requiring EU establishment, which may also give rise to local direct and employment taxes
- Whether a fiscal representative is required varies throughout the EU. The Netherlands, Czech Republic, Malta and Germany do not require it, although Germany requires an EU establishment and use of a customs agent to facilitate imports
- Use of an extended reverse charge for the import and onward supply of goods may be used in certain Member States, for example, France and Spain, without appointing a fiscal representative
- Use of simplifications, such as warehousing and postponed import VAT accounting, may be used in the Netherlands, Belgium and Spain
- There are also specific examples that may be of benefit. Germany allows import into the Netherlands, without payment of Dutch import VAT, followed by onward dispatch and acquisition into a warehouse in Germany, using a German VAT number. This avoids the need for a customs agent, since there is an intra-community delivery to Germany and no formal import into Germany
What indirect tax advantages make the proposed new Freeports appealing to businesses?
- The latest Government paper on Freeports, was published on 7 October and intends to ‘turbo-charge post-Brexit trade’ by ‘creating jobs, driving investment and regenerating communities’
- There will be a bidding process for sea, air and rail ports before the year end and the first Freeports are on track to open by end of 2021
- The UK wide implementation of Freeports is planned to allow creation of Freeports in each of England, Wales, Scotland and Northern Ireland
- There will be a package of tax reliefs to help drive jobs, growth and innovation
- Specifically, there will be simplified customs procedures and duty suspension on goods
- Freeports will allow hubs of enterprise to carry out business inside a land border, but with different customs rules applying
- Freeport policy will create a flexible new customs model, improving on existing customs arrangements
- Imports of goods into a freeport will be tariff free, processing can then be undertaken, followed by local sale, or tariff free export
In summary, Intrastat is here to stay for next year at least, for goods coming to the UK and Northern Ireland from the EU and goods going from Northern Ireland to the EU. The current thresholds for arrivals (imports) of £1.5m and dispatches (exports) of £250K remain. If you currently do not exceed the thresholds, but do during 2021, you will be required to submit Intrastat.
The reason Intrastat will continue in the short term, is that, due to the phased approach for submission of import declarations required to be made next year, there would potentially be a gap in UK trade statistics, where there is a delay in import declarations being made.
Under the Northern Ireland Protocol, customs declarations are not required for trade between Northern Ireland and the EU and so, Intrastat will be required to be reported, for both arrivals and dispatches, for the life of the Northern Ireland Protocol, which will be at least four years. There will be no requirement for Intrastat reporting for goods moving between Northern Ireland and Great Britain.
As it currently stands, Intrastat will not be required for UK arrivals from the EU, during 2022. In addition, we are not aware of any guidance on VAT return reporting, in respect of these transactions, as yet.
Companies House Changes Effective 11pm on 31 December 2020.
Following the UK exit from the EU, Companies House has commenced issuing letters to companies with EEA corporate officers requesting the following information;
- The legal form of the company
- The law by which it is governed
The forms to be completed are CH02/LLCH02 for directors and LLP members and CH04 for secretaries.
From the 31 December the companies will have 3 months to update their records with Companies House.
Company Secretarial will deal with any letters forwarded to Menzies as the registered office, where we are not the registered office please forward to us letters sent to the clients which they might forward to you.
The following forms will be updated with changes to EEA corporate officers.
|AP02||Corporate director appointment|
|LLAP02||Corporate LLP member appointment|
|AP04||Corporate secretary appointment|
|CH02||Change of corporate director details|
|LLCH02||Change of corporate LLP member details|
|CH04||Change of corporate secretary details|
There will be minor changes to references in sections C1 and C3 of the CS01 Form which refer to regulated markets outside the UK