Articles24 Nov 2022
Autumn Statement – Duty Tariffs
Temporarily suspension on duty tariffs on over 100 types of goods imported to UK
Examples of some of the scenarios facing businesses
Our team of Brexit advisors are dealing with a variety of questions from clients. Here are examples of some of the scenarios facing businesses.
We are adding to our dedicated Brexit information hub as announcements are released, so please do keep checking for the latest updates.
If you have any questions about what you need to do be Brexit ready please contact us.
Q. A German company wants to invoice me for service rendered to my company in the UK but say that UK VAT must be paid. As this is a cross-border transaction and the UK is no longer part of the EU, why would there be VAT?
A.The fact that the UK has left the EU does not change the VAT rules that are in place in the UK or Germany, as the UK adopted the EU VAT law as it was prior to Brexit. As a result, in particular the place of supply rules remain applicable for any transactions cross border with EU/UK customers.
The sale being made to you by the German company is a B2B business to business transaction. Under the general place of supply rules for B2B supply of services, the place of supply is the UK, being where your company, as the customer, belongs.
Q. We are considering a different business model, so that our UK company becomes the importer of goods from its parent company in Germany. Is it necessary to register as an importer?
A. It is easy for the UK company to be the importer, but they would need a UK EORI number which they can obtain by registering at https://www.gov.uk/eori/apply-for-eori and it will usually be issued within 5 days.
Q. I am selling a product from Germany to a customer in Northern Ireland, but the goods are being shipped by the customer so collected from me in Germany. Do I charge VAT on my invoice?
A.The goods don’t actually leave Germany in your transaction and you would have no evidence of export, therefore German VAT would apply. However as your customer is in the EU (as Northern Ireland remains part of the EU for VAT using XI prefix to their VAT number) then you could apply the reverse charge.
Q. I heard there were new EU VAT rules that came in during the summer 2021, as we are not part of the EU, they don’t affect me, is that correct?
A. New E-Commerce VAT rules came into place from 1 July 2021 which changes the VAT treatment on supplies by overseas seller by mail order or through online marketplaces.
If your business has any cross-border transactions with any countries in the EU that are through mail order or an online marketplace then your business would be affected.
Q. We are a UK company who purchase goods from a French company, that are sent directly to our distributor in Germany. Previously goods moved without VAT. What do we need to do now following Brexit?
A. Triangulation is a simplification that would have previously applied in these circumstances to zero rate transactions where there are 3 EU businesses in the transaction, A, B and C but the goods move directly from A to C.
Triangulation can no longer apply where a UK company is within the chain as the UK company is no longer within the EU.
As a result, in your situation, it forces a German VAT registration for the UK company, as the UK company is now making an EU acquisition in Germany and then a supply in Germany to the distributor.
The alternative would be to consider setting up an EU subsidiary.
Q. We are not sure of the changes for us as an overseas company. If we had a UK VAT number before Brexit it is still valid after Brexit.
A. Yes. Your VAT registration is not affected.
Q. Does a UK law firm have to charge VAT to entities in the EU after Brexit?
A. The VAT rules for supplies of services have not changed as a result of Brexit.
The reverse charge applies where the supply of service is B2B (business to business), so that the invoice would be zero rated for UK VAT and the customer would account for the VAT in their own country.
To apply the reverse charge, it is necessary for the law firm to obtain proof that you are in business and often this is by supplying an EU VAT number. It is not however a requirement that you are VAT registered, but that you are in business. So as long as you can proof you are in business then they can zero rate the invoice.
Q. We export goods to the EU, after having imported them to the UK. Is there a way to avoid the double duties or do we need to have an EU company?
A. You don’t need to have an EU company or branch, but you may choose to do so. It is possible for goods to come in under customs relief to the UK, without paying duties, but this would usually require the goods to be stored in customs warehouses or freeports and there is of course the declarations on import required.
It may therefore be more efficient, and more convenient to establish a branch or subsidiary in the EU so that goods can be imported directly to the EU for those customers.
Q. Can I just confirm that an overseas company registered for UK VAT can use postponed VAT accounting?
A. Yes, that is correct. Any business registered for UK VAT can use postponed VAT accounting.
Q. Do I need to apply to the EU Settlement Scheme if I am married to a British citizen?
A. Yes. The situation is that even if you are married to a British citizen, unless you are an Irish or British citizen or already hold a valid ‘Indefinite Leave to Remain’ status, you still have to apply for Pre-Settled or Settled Status before 30 June 2021.
Q. We are thinking about hiring an intern this summer, many of the candidates we are looking at are European nationals who are studying at a UK university. Do EU nationals need a work permit for an internship?
A. As From 1st July 2021, EU/EEA and Swiss nationals will need to provide some form of proof that they have a ‘right to work’ in the UK.
Students will therefore need to provide either proof of pre-settled or settled status, both of which provide the student the right to live, work and study in the UK; or a Student Visa which is what most international students need to permit them to study in the UK, and where necessary undertake a Professional Training Year while at University.
Q. Can I still employ and retain EU citizens in my business?
A. Yes and as an employer you have a duty not to discriminate against EU citizens, either as existing employees, or potential candidates for roles in your business.
EU citizens (and their families) currently living in the UK need to apply to the EU Settlement Scheme to continue to remain in the UK to work or study. The deadline for applications is 30 June 2021.
You are not obliged to let EU employees know about the scheme and are discouraged from interpreting government information. However you may wish to direct employees to Government information.
EU citizens coming to the UK on or after 1 January 2021 will have to apply for a visa in advance under the new points based immigration system. To employ skilled migrants your business will need to apply to become an approved sponsor.
Q. Will exporting goods to the EU become the same as current processes for exporting goods to the rest of the world?
A. If the UK leaves the EU without an agreement, rest of world rules will apply. VAT registered UK businesses will continue to be able to zero-rate sales of goods to EU businesses, subject to keeping the required records.
In addition goods shipped to consumers will also be zero-rated, subject to keeping the required records. Further information on exported goods is available here.
Q. Can I pay import VAT on my VAT return?
A. VAT postponed accounting comes into effect from 1 January 2021 which allows some businesses to account for import VAT on their UK VAT returns rather than on each consignment at Customs border. You would need a EORI number starting GB to do so, which is declared on the Customs documentation to allow the postponed accounting. An online monthly statement will be available to download and keep for your records which will show the total import VAT postponed for the previous month which should then be included on your VAT return. VAT postponed accounting only delays payment of the import VAT and does not apply to Customs or Excise Duties
Q. I understand that there is possibility to apply for an account to defer duty payments when you import or release goods into Great Britain, and it could help to save time on customs. What are the requirements for getting this account?
A. A ‘duty deferment account’ is a relaxation for the import of goods, which allows you to delay paying Customs Duty, Import VAT and Excise Duty so that they are paid by direct debit on a monthly basis rather than for each individual consignment.
Previously you were required to have a guarantee in place, usually this is an agreement to pay any actual or potential debts that arise and may be established with funds held on an account and provided as security, to have a deferment account. Under the new customs rules from 1 January 2021 it is now possible to apply for a duty deferment and a guarantee waiver.
HMRC’s decision on your application for a waiver will be based on the financial information that they hold about your company. The level of the waiver will depend on the level of duty that you want to defer each month. If this is likely to be more than £10k per month they will want additional supporting documentation to establish the viability of your company’s finances.
If they reject the waiver application then you would still need to put a guarantee in place.
Q. My business supplies B2B digital services to EU corporate clients. At the moment we invoice companies and don’t charge VAT under the reverse charge arrangement as we have their EU VAT numbers.
How do I deal with VAT after 1 Jan?
A. This will depend on the nature of the ‘digital services’ a comprehensive list of service definitions is available here.
In some situations there is no change and after 1 January EU customers will continue to account for VAT. However, we strongly recommend that you check the HMRC definition of your activity.
Q. My invoices to EU B2B customers are noted ‘This supply is subject to Reverse Charge.’ Do I need to change anything?
A. Unless the services you provide are subject to any one of the special rules you shouldn’t need to make any changes. In a nutshell the UK will operate the same as the rest of the world supplying services to EU countries currently. Which means that VAT should be accounted for by the customer the under reverse charge where the supplier is not registered and the customer is.
Services to customers outside the EU remain outside the scope of VAT as they are now.
Q. I’m an artist and I sell my artwork to customers within the EU and outside the EU. I currently charge UK VAT as under ‘distance selling’ threshold rules and complete EC sales lists for the goods as despatches. What do I need to do after Brexit?
A. I assume you are VAT registered in the UK. After 31 December 2020 distance selling rules will no longer apply from UK. So you may need to register in the destination countries as soon as possible (based on their registration thresholds). There will then be no requirement to complete EC sales lists.
Q. We provide B2B investment advice to EU clients. Are we covered by the finance exemption for VAT?
A. As a general rule investment advice is not covered by the finance exemption for VAT, so assuming that your activity is classified as ‘investment advice’, then this is a standard VAT rated supply. General VAT rules for B2B services will therefore apply, which deems the place of supply to be where the customer is based.
Q. Are leather handbags and other small leather goods considered products of animal origin ‘POAO’ or is this category only relevant for food products? If they are considered as POAO will we need a health certificate to import leather goods from the EU to UK?
A. The latest published guidance on POAOs is available here.
Q. We are the UK subsidiary of a German owned company which is Head Quartered in Berlin. The HQ exports goods to us in the UK, What import declarations are we required to complete?
We then export goods from the UK to NI, What declarations do we need to complete for this trading?
A. A step by step guide to importing from the EU is available here https://www.gov.uk/prepare-to-import-to-great-britain-from-january-2021. Please also see our blog on trading with Northern Ireland
Q. Will the Trader Support Service complete import declarations for excise and controlled goods?
A. The new Trader Support Service (TSS) will educate traders on what they need to do to get their businesses ready for changes to the way goods move under the Northern Ireland Protocol after the end of the Transition period on 31 December 2020. This service is free to use and will record electronic information on goods movements so that traders do not have to engage with new digital customs systems or processes.
The TSS will deal with formalities (such as import declarations and safety and security information) on a traders’ behalf, providing unprecedented support for Northern Ireland business.
Q. What is postponed VAT accounting (PVA). Will it replace C79? Will we not have to pay for C79 but declare it on VAT Returns?
A. You will have to pay customs duties and VAT on all imports of goods from the EU.
If your business is registered for VAT in the UK you’ll be able to account for import VAT on your VAT Return, instead of paying when the goods arrive at the UK border. This is called postponed VAT accounting (PVA).
This will let your business maintain cash flow on goods you bring in from the EU
For further information on when import VAT will be charged and when postponed VAT accounting can be used.
Please see our blog on Postponed VAT Accounting
The guidance on PVA is available here.
Q. What is a CHIEF badge and what is it’s purpose?
A. The Customs Handling of Import and Export Freight (CHIEF) system records the movement of goods by land, air and sea. It allows importers, exporters and freight forwarders to complete customs formalities electronically and automatically checks for entry errors.
Q. Can I make declarations through CHIEF without specialist software, either by web or email?
A. If you’re making import declarations yourself, you’ll have to get software to use the Customs Handling of Import and Export Freight (CHIEF) system or the Customs Declaration Service on gov.uk
You may need to buy specialist software to use simplified procedures.
If you’re making export declarations yourself, you’ll be able to do this using the National Export System
You can submit declarations individually or in batches. And you can submit more than one supplementary declaration for a single simplified frontier declaration.
Q. We have appointed a customs agent who is authorised to use the simplified declaration procedure. Do we also need to apply to the scheme?
A. If you use a third party, the rules for how customs agents represent traders are changing.
From 1 January 2021, customs agents will be able to make simplified declarations for you using their own authorisation. This means that you won’t need to be authorised.
They can only make simplified declarations on your behalf if:
The type of representation you agree with your agent will affect your roles and responsibilities. Further information is available here.
Q. What are the export documentation requirements for our business if we send parcels of goods to the EU via FedEx (or similar)?
A. A customs intermediary is someone who makes import and export declarations for you. This may be done by the business that ships or moves your goods, like a freight forwarder or haulier but it can also be a specific customs agent or broker.
Some other examples are logistics companies, couriers, customs warehouses, or parcel and express operators.
They will often be able to complete your import and export declarations as part of their service.
These organisations deal with HMRC’s systems every day, so they can offer you other benefits. For example, they may:
They will complete paperwork for you and make sure your goods have all the approvals needed to move them across borders. This makes the process easier, and often cheaper, than doing it yourself.
Q. I’m confused by the changes and would like to understand the the differences between EU/XI /EORI numbers.
Does a UK registered business (in England) with a parent in the EU need an EU EORI, or just a UK EORI number?
A. An EORI number is required for businesses to engage with UK customs processes. An EU EORI number is required for businesses to engage with EU customs processes.
Our blog on EORI gives an overview of the requirements
For more information about UK EORI go to www.gov.uk/eori.
From 1 January 2021 businesses will need an EORI number that starts with XI to:
To get an EORI number that starts with XI, you must already have an EORI number that starts with GB.
If you do not have one, apply for an EORI number that starts with GB as soon as possible.
If you already have an EORI number that starts with GB and HMRC thinks you need one that starts with XI, they’ll automatically should have sent it to you in or by mid-December 2020.
More information on how to apply for an EU EORI to your member state
You’ll only need one EU EORI that can be used throughout all EU member States.
Q. We are importing goods from the EU with a forwarder and have appointed a customs agent. We are a small importer with no access to CHIEF.
In this situation who should issue the supplementary declaration for our imports?
Is it us, the importer, or our customs agent?
A. You will need to agree with the Customs Agent what they will be doing for you. From 1 January 2021, customs agents will be able to make simplified declarations for you using their own authorisation. If they do then you don’t need to be authorised. However they can only do this if:
The type of representation you agree with your agent will affect your roles and responsibilities. For more information.
Q. How will PVA – postponed VAT accounting work and will the new scheme replace C79?
A. If the UK leaves the EU without an agreement, you’ll need to pay customs duties and VAT on all imports.
If your business is registered for VAT in the UK you’ll be able to account for import VAT on your VAT Return, instead of paying when the goods arrive at the UK border.
This will let your business:
You do not need to register to use postponed VAT accounting, but you do need to enter your VAT registration number on the customs declaration.
If you are VAT registered and using Entry In Declarants Records to make your customs declaration you MUST use postponed VAT accounting to pay your import VAT.
Please see our blog on postponed VAT Accounting
Further information postponed VAT accounting
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