This blog was last updated on September 22, 2021
Brexit continues to create a stir and the only absolute is that confusion dwarfs certainty when it comes to understanding the new tax laws that went into effect when Brexit became a reality.
To address some of the more pressing questions, we gathered three industry experts for a webinar to provide some clarity into this continuously evolving topic. You can download and listen to the entire webinar here.
Joining us were:
Andy Spencer, director of consulting services at Sovos. Andy is a highly experienced indirect tax professional who has worked in VAT for over 25 years. Within the services consulting team, he is involved in delivering major international VAT projects for blue chip clients, bringing expertise in both structural compliance and commercial efficiency.
Alex Smith, a director and member of the consulting services team at Sovos. Alex specializes in providing cross border advice to a wide range of businesses, delivering detailed analysis reports and contract reviews.
David Miller from The Customs People. David has been involved in the customs field for over 30 years with the last 22 of those as a customs and VAT consultant. David assists all types of international businesses from niche companies up to large household names.
A question for Andy Spencer
Q: I understand that non- EU businesses must appoint a fiscal representative if they want to be registered for VAT and certain member States in the EU. What is the position post-Brexit for UK Companies?
A: Registration requires fiscal representation in several member States, and that’s always been the case for non-EU companies. The UK and the EU have reached an agreement, the Trade and Cooperation Agreement, and that has some provisions on mutual recovery and assistance. And what’s happening now, is that several member States are reviewing the requirement to UK companies to have a fiscal representative because of the provisions within the Trade and Corporation Agreement.
So now, we’re in a bit of a flux situation for some countries that said that there’s no longer a need for a fiscal representative, including places like Poland and Italy. Some other countries have said that it won’t be required if the Trade and Cooperation Agreement is ratified. Ratification was supposed to have taken place by the end of February, however the EU wasn’t ready for that. So, they asked for an extension until the end of April, the UK has agreed to that. Now, we’re in that uncertain period where we haven’t got full gratification on the EU’s side of the agreement.
As always with the EU, it’s changeable, it’s also dependent on the member states. So, you need to take advice and look where you need to be registered, or where you are already are registered and see whether there’s a requirement to appoint a fiscal representative.
A question for Alex Smith
Q: Most of the focus of Brexit has been on goods. What is the position with regards to services? Have there been any changes on how that applies to services between the UK and the EU?
A: That’s a good question. We get questions about goods all the time, but the impact on services hasn’t been quite the same. At the end of the transition period, the rules for services for suppliers to even mistakes effectively become the same as supply services in Non-EU countries.
Mini One Stop Shop was introduced back in 2015 and this simplified reporting for this. But unfortunately, because its the EU, you can’t report UK sales within the MOSS system anymore and vice versa.
You can’t use UK MOSS anymore. So, if you’re a UK business, you need to go and register for MOSS in another member State, if you’re an EU business selling into the UK, then you need to get registered for VAT in the UK.
A question for David Miller
Q: The UK and the EU have agreed to a zero-tariff deal, but this is conditional on goods meeting the rules of origin. What does that mean in practice? Also, what happens if goods integrate Britain from a country, which has a trade deal with the EU? What is the position if they are reexported from Great Britain to the EU?
A: This is an interesting question. Like the others of the EU and have caused a lot of grumpiness from myself and other people in our industry. Prime Minister, Boris Johnson announced last Christmas Eve that there is oven ready, Tariff free deal. Unfortunately, when we read the text, it’s not that at all. It’s rather less than what we would have expected and would have liked. So far, this year has been a lot of dealing with the fallout from that.
In essence, what it basically boils down to is that, to qualify for no duty to apply on trade between the UK and the EU, there must be some level of UK origin. In plain English, the trade deal in terms of trading goods between the UK and EU does rely on there being processing and manufacturing in one of the other the countries. There must be a process in the UK, and that must be more than what they call an insufficient process, which is defined in the trade agreement.
So, things like relabeling, repacking don’t qualify. It must be some substantial actual transformation. If that doesn’t happen, then those goods are not going to qualify being of UK origin and therefore were exported to the EU, imported into the EU with no duty. But the second stage is that there are specific rules of origin, depending on the commodity code, depending on the tariff heading the four-digit tariff heading of those products, and usually that’s surrounding the actual amounts of non- EU UK materials used in production.
This is just a sampling of the conversation that took place with our experts. One thing is clear, the landscape continues to evolve quickly, and more changes are certainly forthcoming. We encourage you to download the webinar and listen to the full list of questions and answers as they provide valuable and necessary insights into the new tax landscape in response to Brexit.
