To help businesses understand the impact of Brexit, we’ve cover 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 apply 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, import VAT and potentially customs duty liability applies to imports. Some Member States allow for accounting import VAT 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. There is still a requirement for VAT registrations wif the business remains the importer of record. It 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 for registration 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, businesses require a MOSS registration for another Member State.
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, this set-up requires further compliance measures, including guarantees.
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. It is essential to do these reviews, but must be done now for full effectiveness.
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.