The Countdown Is On: VAT after Brexit

It is vital that businesses of all sizes, take steps to understand the impact of Brexit and VAT on their company’s operations and processes. Failure to implement these new requirements will hamper the ability to trade with the UK and could lead to significant delays in moving goods from, to or across Great Britain from 1 January 2021.

To understand these rules in more detail, we interview Lisa Dowling, Global VAT Director at Taxback International for her view on some of the most common Brexit and VAT related questions.

Are companies prepared for VAT after Brexit?

For some areas of VAT, businesses are not prepared. The requirement to appoint fiscal representation for some EU countries is still unclear. The process for postponed accounting for import VAT after Brexit for some countries is still unclear. UK businesses are unsure if and how they should comply with these changes and there is further complexities coming with the EU e-commerce changes from 1 July 2021.

Companies are working now to maintain supply chains and to assess the customs impact of Brexit and this is the priority. I don’t think there will be delays to the supply chains, but I think businesses may have delays in complying with new VAT requirements like the appointment of fiscal representatives, the setting up of bank guarantees, deposits and the application of changing tax treatments to UK to EU and EU to UK supplies.

Which companies are at risk of VAT implications after Brexit?

Any company that requires new VAT registrations or fiscal representation as a result of Brexit will see a practical impact on their VAT processes. If a UK company was previously using a call off stock simplification in Europe for example, they need to review the impact of Brexit and how they will manage this supply chain going forward.

Online sellers to consumers will also see significant changes to their VAT processes depending on how they want to continue to service their online orders. Some of our UK clients are moving stock from the UK to fulfilment warehouses in Europe to service their EU markets. Some are importing into Europe from China for example and again fulfilling the EU consumers from that EU country of import. Some are continuing to supply directly from the UK to consumers in Europe.

These businesses may therefore continue to have multiple registration requirements throughout Europe until simplifications are introduced in the EU from 1st July 2021.

What challenges lie ahead for UK and European businesses?

In all cases we would need to look at the who, what, where questions for all transactions, in order to assess the challenges that may lie ahead.

• Who are you selling too: B2C, B2B, both?
• What are you selling: goods/services, both?
• Where are you selling: from where, to where?

The answers to these questions will set the stage for any challenges you may have post-Brexit and beyond. If you are selling to consumers in the UK post-Brexit, there will be a reporting simplification in place from 1st Jan 2021 and if you are selling to consumers in Europe there will be reporting simplifications from July 2021. The timing difference between the end of the Brexit transition and the European e-commerce rule changes will create a big challenge for many online sellers.

Fiscal representation – what is it and when is it required?

Fiscal Representation is required in the following scenarios:

• Non-EU businesses registering in an EU Member State where Fiscal Representation is required
• EU business registering in another Member State where there is a beneficial VAT regime. For example, to use the import VAT deferment scheme in the Netherlands

After Brexit, as the UK will be considered a 3rd country, UK established businesses will need to appoint fiscal representation where it is currently required for other non-EU countries. Fiscal representation has to be in place prior to the submission of the first post Brexit VAT return.

Should my business get an EORI number?

In preparation for Brexit, a business will have to apply for an EORI number. You need an EORI number to move goods into or out of the EU (including the UK).

An EORI number (Economic Operator Registration and Identification Number) is a unique ID code used to track and register customs information in the EU.

What’s next for Brexit and VAT?

Click here to view our full interview with Lisa Dowling, Global VAT Director.

Taxback International can provide all of the services mentioned above regarding VAT after Brexit and your VAT obligations. You can contact us directly to speak with a VAT expert about your Brexit and VAT concerns.