7 minute read
Facing up to Brexit tax practicalities
Among the changes exporters and importers are having to get used to in the post-Brexit trading climate involve new tax liabilities, namely VAT and customs duty, which must be managed to ensure efficiencies. Andy Ilsley (pictured), VAT director at audit, tax and consultancy firm RSM, explains what the key indirect tax issues are.
Intelligent Vending, a Derbyshire exporter that specialises in technology for self-service retail, has faced tax challenges since the end of the transition period. Director Sam Roe (pictured) explains what these were and how the company has responded.
1. RULES OF ORIGIN
Ensuring any goods traded between GB and the EU meet the respective rules of origin as laid down in the agreement – and this can be complex. Goods merely being shipped from either jurisdiction will be insufficient to qualify per se for tariff-free access. It should be remembered that duty can’t be recovered in principle, unlike import VAT.
2.PAPERWORK NECESSITIES
Tariff and duty-free trading will, in any event, not prevent customs declarations being required at the respective EU and UK borders –and failure to have the right paperwork or arrangements in place is causing delays.
It’s important to have clear incoterms agreed between the buyer and seller so that both parties understand who has the respective obligations to prepare the goods for export and to complete the paperwork and declarations for importation as the goods arrive at the EU port of entry.
Prior to the end of the transition period on 31 December 2020, incoterms were broadly academic when such transactions were intracommunity supplies – now clarity is crucial.
If goods are being delivered on delivered duty paid (DDP) terms, for example, in order to minimise
What challenges have you faced from leaving the EU?
The overall problem we faced was our trading involves complex supply chains with multiple parties involved within EU and the rest of the world. On many occasions, goods never even cross UK borders and they are routed directly through Europe to end clients.
Our main challenge was to ensure we could transition to the new systems required post-Brexit, and to structure our processes and incoterms in such a way that we would keep our EU customers happy,. Minimising administration for our supply chain partners in the EU was also a priority.
How have you sought to address these challenges?
Initially, we focused on setting up systems to maintain trade of our faster moving component-related products, intending to then research origin regulations and new certifications for our own designed and manufactured technology solutions at a later date.
In reality, this staggered approach has only been possible due to the Covid-19 situation as the majority of work related to turnkey product development requires close contact with clients, which has not been possible due to the pandemic.
What types of tax issues have you faced?
Sales tax was therefore the major issue for us as the UK was no longer part of the EU VAT scheme for simplified trading, so it was not possible to operate in the way we had previously. In addition, we required the ability to continue importing and exporting directly from the EU without incurring unnecessary costs and administration. We found it extremely difficult to get specialist advice without paying large accountancy firms for consultancy. Many hours were spent researching online and trying to obtain advice through our network of contacts.
The problem was that as many of our queries were tax-related, third parties were therefore reluctant to offer advice – also, in many cases, it didn’t appear that the definitive position was clear across the board as we received conflicting views.
How have you managed to deal with the tax issues?
We’ve now set up a Netherlands VAT number and EORI to mitigate issues where possible and we have so far found the country’s Tax and Customs Administration, the Belastingdienst, to be extremely efficient when answering queries and processing paperwork.
Much of the online documentation is available in English, but we have found that learning Dutch will certainly come in useful in the long term as the client area of its website, and all the hard copy documentation we have received to date, is not currently available in the English language.
Moving forward, we intend to spend more time analysing our supply chains with an intention to source more products from the UK and increase British manufacturing where possible.
We are also re-working the designs for a number of our own products to ensure these are post-Brexit friendly and tariff-free for export under the new regulations.
To summarise, it has been a crazy amount of work, but we are now starting to see light at the end of the tunnel and we intend to focus on growing our international trade, while opening up new markets for our products, as much as possible in the future.
CASE STUDY
disruption and administration for the buyer, the seller will need to make the import declarations and consider a local VAT registration to pay and recover the import VAT.
An EU Economic Operator Registration Identification number (EORI) will be required to clear goods for circulation in the EU and the business may also involve a requirement to appoint a fiscal representative given the UK’s new “third country” status with the EU.
3.B2C DUTIES
Many businesses have taken the opportunity to critically review supply chains and moving stock into a single EU point of entry, with VAT and duty declarations to be made and held there, pending further distribution to EU customers free of further declarations or paperwork.
This is particularly important in light of difficulties arising from B2C sales from the UK to private consumers in the EU, with the imposition of import VAT and duties causing logistical problems with carriers, as well as delays, unforeseen costs and disruption for customers.
4.THE NORTHERN IRELAND PROBLEM
The particular arrangements regarding trading between GB and Northern Ireland, and also between NI and the rest of the EU, need to be understood particularly where goods might be “at risk” of ending up in the EU.
Impacted businesses should register with HMRC’s Trader Support Service to ensure they understand the necessary documentation required and to obtain an XI-prefixed VAT number and EORI number.
Online courses available to help firms with Brexit
Exporters and importers will be guided through ongoing Brexit issues during a series of new international trade training sessions being launched by the Chamber this month.
POST-EU TRANSITION BUSINESS SUPPORT
The Chamber is being supported by Nottinghamshire County Council to deliver a series of free online workshops covering the key issues faced by international traders. They include:
Customs declarations overview
7 April, 9-10.30
Trading with Northern Ireland
12 April, 1-3.30
The importer’s wheel of origin
12 May, 9-10.30
How to pay less customs import duty – an introduction
12 May, 2-3.30pm
Sessions are aimed at SMEs based in Nottinghamshire and are limited to one attendee per company.
For more information, visit bit.ly/NottsEU.
EU TRADE SUPPORT PROGRAMME
Delivered virtually over four half-day sessions beginning later this month, the EU Trade Support Programme is suitable for businesses trading with the EU that are either new to customs processes or want to update their knowledge.
Staff with responsibility for sales, purchasing, shipping and maintaining appropriate export and import records will benefit the most from participation. Sessions, taking place from 9am to noon, include:
New rules for UK-EU trade
27 April
Understanding origin and the importance of HS codes
10 May
Customs special and other procedures
19 May
Customs declaration training
8 June
The course costs £1,850 + VAT for members and £2,100 + VAT for non-members.
For more information, visit bit.ly/EUTSP21.
The Chamber can also deliver bespoke international trade training sessions for organisations that want to upskill multiple employees. For more information, contact Julie Whiting or Theresa Hewitt on internationaltraining@emc-dnl.co.uk
Access training with grants
Grants of up to £2,000 are available for help businesses pay for international trade training.
The Government has made £20m available via the SME Brexit Support Fund to help firms – with fewer than 500 employees and an annual turnover of less than £100m – gain the professional advice they need to continue trading with the EU and beyond.
Funding can be used for training on:
• How to complete customs declarations • How to manage customs processes, as well as use customs software and systems • Specific import and export-related aspects including VAT, excise and rules of origin
Julie Whiting, international trade training and services manager at the Chamber, said: “Changes to customs rules and new paperwork for trading with Europe have been challenging for some businesses.
“Early application for this time-limited grant is being encouraged and we are looking forward to supporting businesses through our practical EU Trade Support Programme.”
