HMRC: Declaration changes will affect all importers and exporters.
VAT has been one of the most fraught issues for UK businesses in the Brexit process so far. Both Brexit and an unrelated EU rule change designed to combat fraud mean UK businesses have to take care getting their VAT reporting right this year.
Existing intra-EU VAT and duty rules will apply throughout the transitional period – so it’s business as usual for now but businesses will need to start planning for trading with the EU under the proposed framework of a Canada-style free trade agreement and this involves complex VAT procedures and applications.
Businesses, particularly in the manufacturing, food, motor and those with EU parent companies, need to start planning for new looser trading arrangements with the EU which could come into force as early as 2021. However, most observers agree that 11 months to negotiate and finalise a free trade agreement is wildly optimistic and without the ability to extend, “no deal” does not disappear.
In addition, from January 1, 2021 businesses trading intra-EU will have an increased involvement in the international supply chain. All imports and exports in and out of the UK will be subject to customers declarations and added controls.
In September 2020, HMRC is due to fully launch its new customs declaration system, CDS, which will involve sweeping changes to the way import and export declarations are made. This will impact all importers and exporters due to the extensive changes imposed under the new system. This should be factored into any customs planning. Major VAT changes in the EU came into force on January 1 and businesses need to be aware and take care to be compliant.
The EU VAT system which exempts goods dispatched from one member state to another and from one taxable person to another, provided certain conditions are met, was designed to facilitate economic integration while combating fraud. HMRC have now published their interpretation of the new EU rules which will apply to the UK throughout the transitional period.
Suppliers must hold evidence such as air freight invoices, a signed CMR document or note and receipts from a relevant warehouse among other forms of documentation in order to qualify for zero-rating.
UK businesses supplying goods and services directly to consumers established within the EU will need to consider their EU VAT obligations very carefully. The UK exit from the European Union is likely to cause significant changes to UK businesses’ VAT accounting obligations. Affected businesses need to put plans in place.
This article appeared in The Courier: Business Matters Supplement published on 25 February 2020
Henderson Loggie
Chartered Accountants, Tax and Business Advisors based in Aberdeen, Dundee, Edinburgh and Glasgow.
