TBI Expert View is our focused look into the ever-evolving world of global VAT and what changes companies should be making for 2022.
Our series will feature discussions from industry experts on emerging trends such as Brexit and the tail end of the storm, SAF-T and EU future plans, E-Invoicing and how businesses should be preparing, Global Payments optimisation and how clients can eliminate late payments to Tax Offices, minimising their fees associated with Tax Offices, increasing digitalisation of global tax processes, advisory information, as well as a look into our development of the world’s first end-to-end VAT compliance platform – Comply.
In Episode 1 of Series 2 – TBI Expert View, Lisa Dowling, our Senior Global Director – Head of Indirect Tax, Advisory and Compliance and Joe Healy, Chief Strategy Officer discuss the ‘Tail End of the Storm’ and the practical implications of Brexit for our customers.
Have a read of their in-depth discussion here:
Hello, everyone. So, we’re kicking off the next session of the expert view to talk again about Brexit and Joe Healy, our Chief Strategy Officer, has joined me in the studio today again.
I know people are probably blue in the face. It’s not going to be a big socio-political conversation on the pluses and minuses or the positives and negatives. We’re going to zero in on the practical implications of Brexit for our customers.
Yes, we have spoken about it before, you and I particularly have sat and talked and recorded sessions about Brexit. I suppose now we’re in a better time because there’s less uncertainty.
We’re kind of at the tail end of the storm really with Brexit. It feels like it is true spring, we’re getting out of COVID, we’re coming out of Brexit, so it’s all good.
But we’d like to just do a recap for everybody, just to talk about what has happened in the last twelve months or so since the transition period ended. And just to talk about what our clients are still struggling with and then just go on from that and just see, what’s coming down the line in relation to Brexit? What’s left for us to talk about?
Absolutely. I always equate it to the five stages of grief. You know, we start off with denial, then anger, but I think we’re getting closer to acceptance now, right? Yes, we have some kind of an idea as to what kind of cards have been dealt and what kind of challenges we have to face. Of course, there are still inconsistencies and a few unknowns left to be tackled.
But for the most part, we know that, yes, the challenges that we predicted have come to pass. There are barriers to doing business, in the EU now if you’re a British company and vice versa and anybody who said there wouldn’t be barriers to business for businesses was talking rubbish. But that’s not for us to worry about. We can just get down to the practicalities. I know and you know, over the last 24 months we’ve had a lot of these conversations of customers ringing us looking for advice and advisory support. We know a lot of the unknowns have been resolved, but there are still known unknowns that we have to encounter on a daily basis. But for you, those inconsistencies and I would say grey areas – what has been the biggest challenge post-transition period for our clients?
Yes, I think businesses moved to VAT register in countries in various multiple member states because they knew that simplifications were going to be gone, call off stock was going to be gone and triangulation was going to be gone. They were the knowns. Then we also had situations for a company selling to customers around Europe, they wanted to decide whether they were going to be the importer of record, or their customer was going to be. So that was a decision that they made. So that was a known. They were either going to register in those countries or their customers were going to be the importer of record. They knew in some situations that their customers wanted them to be the importer of record. Again, that’s a known. Where we run into difficulty was time delays with registrations when they were needed, time delays and administrative burden with EORI numbers. Also, fiscal representation for third countries is required if you need to register in an EU member state, not all member states, but some member states. We knew that before Brexit, but in the run-up to Brexit then and we had the mutual assistance protocol within the Brexit deal on the 24th of December, which changed the need for physical representation in some member states. Companies didn’t know that. We were scrambling to put fiscal representation in place for some companies in Italy, for example, then the mutual assistance protocol was there, and fiscal representation was no longer required. So, you can just imagine the administrative hassle around those kinds of things. They were the kind of things that companies couldn’t plan for. They were looking at their transport links, their supply chains, their margins, looking at where they needed registrations, things that they could plan for like delays with tax offices, tax office software not being ready and the fiscal representation situation as well. They kind of were the unknown and that’s where the stress and the headache came.
I could reel off at least five or six clients off the top of my head, whom I know right now are still struggling with that. They look at their legal entity structure and where they must be VAT registered, where they want to de-register, and that pivots on a weekly to monthly basis, based on new findings that are coming out at the moment. What I would say is a lot of our customers are still in that state of flux.
I think we know what has happened. We were there, we lived through it, we survived. I think if we can survive Brexit and Covid, we’re doing really well. What we need to still talk about is what companies are still struggling with today because there are still those struggles that are going on. And I think that’s a great point that you made, Joe, companies are revisiting what they did, just in the aftermath of that transition period to see, is that the best option, does that give my customers the best experience? Is that the best for my profit margin at the end of the day? What can I do differently?
And that’s it. And the consumer has been caught up in all of this as well. We all have our own experiences. I’m sure the audience at home and ourselves within our own organization here at TBI, where we’ve had experiences. I’m a keen golfer, I had a great merchant in the UK that I used to buy all my golf kit from, and I can no longer avail of their services and their goods because they made me the importer of record. Now that’s something that I’m not going to tolerate, so I’ll just take my business elsewhere. That happens a lot of the time.
It absolutely does. We even have situations in Germany for example, we have situations where companies (UK businesses) have decided that in Germany, their customers are going to be the importer of record and the German tax office have come back and said that if it doesn’t say on the website in the terms and conditions that your customer is the importer of record, the German Tax Office still wants that business to pay the import VAT. So, those goods have been imported into Germany, the customer is the importer of record. The sale has been made, the customer has paid the import VAT and yet the German tax office is now saying that if your T&Cs on your website don’t say that your customer is responsible for the imports, I want the import VAT from you.
That’s hugely penial, right? I mean, what’s the remedy there?
Well, according to the German Tax Office, appeal. But that’s just time, effort, resources, cost and you’ll need to provide proof of the importation and the documentation and working with your carriers. Then to compile that information, and if there’s a gap in your documentation, where do you stand? We are on behalf of our customers in contact with the EU Commission on topics like this. But, it’s for businesses to have to use a third party to try to figure out what needs to be done in these kinds of situations. So, those things are still going on, and we still have an administrative burden with Brexit and with the EORI numbers and linking of multiple VAT registration numbers to your EORI number. Clients not realising that you need to do that link with multiple numbers and goods ending up in a port in Belgium, stuck, but that’s still going on.
Yes, it is. I suppose from our standpoint, we have to always be cognisant of how we can support, how we can help. And of course, we do provide a huge amount of advisory services to our clients. We do provide a huge amount of compliance services as well as the VAT recovery piece to our clients. What we’ve also identified through our client platform program, ELEVATE is that one of the best sources of information for our customers is that peer to peer networking and knowledge sharing. Am I right?
Absolutely! That was the big thing with Brexit. The theory is there. We know what we have to do, but what is the correct form that I have to fill out? What is the box that I need to tick? We still see issues with the introduction of Import One Stop Shop (IOSS), One Stop Shop (OSS), which we actually haven’t managed to get to. We could talk for hours about that. Ticking the right box to make sure that your IOSS number is noted on your customs documents so that you’re not also charged import VAT. The peer groups that you’re talking about, Joe, the information sharing is to get to that point so that we can share the pitfalls with our clients and make sure everybody knows what needs to happen. Not just to advise and talk about theory, but to talk about the practicalities of it.
We saw it first hand at our recent ELEVATE event in November, whereby two of our panellists shared their information, insights and knowledge and experience of OSS & IOSS to date. One didn’t go down the IOSS route and explained why the other one did, but now is reconsidering based on the findings of our other customer, so that’s invaluable.
Yes and I think that’s also something that’s happening. It does line up with Brexit because our UK established businesses are still looking at those simplifications and how they can use them and when they can use them. With IOSS, some companies didn’t use it on simplification because of the consignment value limit that was applied there. But again, that’s something that might change in the future. EU Commission is still looking at that and they’re still looking at simplification for e-commerce. So that might change down the line and these kinds of platforms and forums would cover those changes that are happening.
The unknowns that we have to be cognisant of as well as you know, you reference at the beginning, we knew that the simplifications were going to be gone. Is it a case to watch this space because those simplifications might be reintroduced? Is this a moveable feast?
I suppose it’s changing of simplification. The UK businesses lost the use of call-off stock in some situations on triangulation. For e-commerce though, the EU Commission is looking at that space and trying to keep up with the digital economy. They’re introducing other simplification, so OSS, the mini OSS being extended to OSS, the introduction of the IOSS. That is simplification introduced to manage the digital economy.
As if we didn’t have enough complexity, Lisa. We also have the Northern Ireland Protocol and focusing on it from a VAT perspective in Ireland, we can still trade with Northern Ireland as if they’re in the EU, which is a great thing. But there are challenges around that and we have to be cognisant of those as well.
I suppose we just need to keep an eye on that situation. The Northern Ireland Protocol, from a VAT point of view, means that Northern Ireland is treated as an EU member state for the movement of goods, not for services. So it’s keeping an eye on that and seeing what way that’s going to go and just preparing businesses then for any change that might come down the line in relation to that situation.
And what else is coming down the line? Is Intrastat in the UK?
There was a change for Intrastat in the UK from January of 2022. Businesses established in Great Britain no longer have to submit Intrastat arrivals from January 2022. So that’s good news, one less piece of documentation that has to be covered by a business established in Great Britain.
Fantastic. Anything else we should be cognisant of and just keeping our eye on going forward?
I think we’re over the worst of Brexit. I truly believe that we’re at the tail end of the storm as regards Brexit. I think it’s time now for businesses to revisit what they put in place. Make sure that’s the best option. I know that we have clients coming back to us revisiting what they did and their approach after Brexit. Also, customer experience – just examine that situation. Looking at the sales, the geography of their sales and just seeing what’s the best option from a cost point of view for VAT compliance and seeing if it’s worthwhile revisiting the registration obligations in those countries.
Absolutely. So, the message here, loud and clear is, we know a lot of the unknowns, there are still elements to be resolved, there are still simplifications being reintroduced in different guises. So, collaborate and work with your peers, collaborate and work with the likes of ourselves at TBI because we’re monitoring it all the time and I’m sure we’ll be back here again to revisit Brexit. I really enjoyed the day; it was good to wrap our heads around it again.
Thanks a million for joining me today, Joe. It was really good and in our next session, we talk about SAF-T and e-invoicing.
Stay tuned for Episode 2 of Series 2 – TBI Expert View when Lisa Dowling, our Senior Global Director – Head of Indirect Tax, Advisory and Compliance will be joined by our Senior VAT Compliance Advisor, Barbara Barcsik to discuss SAF-T.