The UK left the European Union on 31 January 2020, and the current transition period – due to end on 31 December 2020 – is just days from its end.
On 1 January 2021, major changes are coming which will impact the UK’s trade relationships with its closest neighbours.
To help businesses understand the impact, we’ve covered some of the essential considerations for supply chain planning in this blog.
Goods and services in 2021
The treatment of goods moving between Great Britain and the EU will change significantly from 1 January 2021. Exports and imports will be applied to GB-EU trade, replacing the concept of dispatches and acquisitions which applies at present. Though zero rating for exports exist if relevant conditions are met, crucially, imports are liable to import VAT and potentially customs duty. Some Member States allow import VAT to be accounted for on VAT returns to mitigate this. For postponed accounting applied to B2B transactions, its essential to determine who will act as the importer of record.
For B2C sales, the distance selling regime will no longer apply to UK businesses shipping goods from GB. VAT registrations will still be required if the business remains the importer of record and will become necessary in any Member State without threshold. If the customer acts as importer of record in their own country then VAT registration won’t be necessary, but there could be additional commercial implications to consider in this scenario, as well as an impact on sales.
When it comes to the treatment of services, changes are unlikely. It appears that the UK will continue to apply VAT place of supply rules in line with the VAT Directive, in part to avoid instances of double or no taxation. However, businesses should consider the liability to be registered in the EU and the UK on an ongoing basis, and the UK Mini One Stop Shop (MOSS) for supplies of Telecommunications, Broadcasting and Electronic Services (TBES) will no longer be available. Consequently, a MOSS registration for another Member State is needed.
If new EU registrations are required, fiscal representation will be necessary in many countries. Fiscal Representatives are often jointly liable for the VAT. In addition, further compliance measures, including guarantees, are required for this set up.
Businesses engaging in GB-EU trade of goods must review their supply chain and be fully aware of the implications of Brexit related changes in the New Year. Many businesses may find that it’s possible to make changes to their supply chains to mitigate any negative impacts by changing contractual relationships and reconsidering the flow of goods. These reviews are essential but must be done now to be effective.
Keen to know how Brexit will impact your VAT compliance obligations? Download our recent webinar Brexit and VAT: Protect your valuable supply chains and minimise costly disruptions to find out more:.