After four and a half years, or what seemed in real time like an eternity, a trade deal was finally struck between the UK and EU. As deal rumours came and went over the past year, and finally a very large document emerged as the final deal, it has not been the easiest change to decipher and plan for. However, we now have confirmation on the deal, and what this will mean for businesses who trade with the EU.
This article sets out what importers and exporters of goods should consider for VAT and duties post Brexit. For those who buy and sell services, fear not! There is a separate article on VAT change for services post Brexit here.
1. What was the situation pre-Brexit?
Prior to Brexit, sales of goods cross border within the EU were treated as follows:
- Goods sold to businesses were zero rated as dispatches in the country of origin, with the goods usually moving freely through port to the business customer. The business customer would self-account for VAT in their country on their VAT return; and
- For goods sold to individuals, VAT had to be accounted for by the supplier. For convenience, there were "distance selling" thresholds set by each country. If the annual value of goods sold B2C to customers in that member state was below the threshold, the UK supplier could account for UK VAT. If the annual value exceeded the threshold, the UK supplier was required to register in that member state and account for VAT there.
2. VAT checklist for imports and exports post Brexit
The above rules still of course apply for goods moving between EU member states, it is just that the UK is no longer a member state. With this in mind, we need to look more closely at the rules which exist for exports out of the EU, and imports into the EU. This is covered in detail in the rest of this article but, in summary, the following areas are key:
- VAT liability and place of supply - what is the UK VAT liability? Is there any VAT accounting in the country of export/import? Who accounts for the VAT?
- EORI number - Do you need one? Do your customers/suppliers have one?
- Customs declarations and registrations - can you take on the responsibility yourself? Would it be HUGELY easier to appoint someone else (almost certainly yes!)?
- Commodities codes - What is the correct code for your exported goods? Has the supplier got this correct for imported goods?
- Duties - are duties required to be paid? How could you avoid them? How could you defer them?
- Simplifications and deferments - could you make use of these? How?
There may of course be other areas specific to your business and additional rules for the types of goods you import/export. As such, I would always advise seeking advice for your business circumstances.
3. UK businesses exporting from the UK to the EU
VAT liability and place of supply
In very simple terms, exports of goods from the UK to anywhere in the world should be zero rated for UK VAT purposes. This has always been the case for exports of goods to non EU countries (both B2B and B2C). However, I say "should" because this is subject to the following criteria:
- The goods are exported from the UK within the relevant time limits post-sale (usually three months);
- You obtain evidence (official, commercial and supplementary) to prove export; and
- For indirect exports (where the customer arranges transportation) obtain evidence of this, and that the goods are not used prior to leaving the UK.
There may or not be liabilities at the customer's end. These may or may not be payable by the customer or by the UK supplier, and this will depend on local rules.