Brexit: changes to the process of dealing with overseas businesses
Brexit has happened and as we return to work we have to get used to new ways of operating. There are changes for supplies to businesses in the EU or buying from businesses based in the EU.
The biggest changes affect goods, by goods we mean stock, materials and any other tangible product. There are some changes for services also but at present these changes are not so significant.
We will now set out the various changes for you:
Buying goods from the EU
Until 1st January 2020 the process for buying stock or materials from anywhere across the EU was straightforward.
- The order was placed.
- The supplier asked for your VAT number in order to invoice you without VAT.
- The supplier sent the invoice and transport to the UK was arranged.
- You completed your UK VAT return correctly and in some cases some statistical forms – EC Sales lists and Intrastat declarations.
Now things are different and the process is longer.
- The order is placed
- The EU supplier no longer needs to know your VAT number
- The supplier will invoice without VAT because now they are exporting goods to outside the EU
- Before the goods can leave the EU the supplier must make a customs export declaration.
- Another customs declaration is due when the goods arrive in the UK. This is the responsibility of the UK importer and they must make the declaration to HMRC.
- Import VAT is payable to HMRC. If the correct arrangements are in place VAT registered importers do this via their VAT returns and HMRC issue a certificate (‘monthly postponed import VAT certificate’) confirming how much is due. In other circumstances the import VAT is payable to customs when the goods are imported.
- EC sales lists need not be completed for sales made after 31st December 2020.
- There is less to report on Intrastat returns. For details see Notice 60: Intrastat general guide – GOV.UK (www.gov.uk)
If the EU supplier does not complete the export forms correctly the goods may be delayed leaving the EU. Likewise if the UK import declarations are not dealt with properly the goods may be held up at the port or place of arrival in the UK.
Selling goods to the EU
The reverse situation applies when selling stock or materials to the EU. As a UK supplier you do not need the buyer’s ‘VAT’ number and nor do you charge VAT. However you must make the necessary customs export declaration and have proof that the goods leave the UK.
Customs import forms are due in the EU but these are the responsibility of whoever is importing the goods into the EU.
In summary the new arrangements create more form filling and two potential holdups if the customs forms are not completed correctly. How to get help with this is explained at Get someone to deal with customs for you – GOV.UK (www.gov.uk)
In some circumstances it is now necessary to complete customs forms when supplying goods to or buying goods from Northern Ireland. This can be checked at Trading and moving goods in and out of Northern Ireland – GOV.UK (www.gov.uk)
Changes to the VAT treatment of goods purchased from overseas
Prior to 1st January 2021 many small value orders (less than £15) were not liable to VAT when fulfilled from overseas. This is no longer a way of avoiding VAT.
All small orders fulfilled from overseas are now liable to VAT. The foreign supplier is now required to register for VAT and charge VAT in the same way as a UK based business. For example before 1st January 2021 there was no VAT on a £10 DVD bought from China. Now the Chinese supplier must register for VAT and charge tax at 20%.
The Government advise this will ensure that goods from EU and non-EU countries are treated in the same way and that UK businesses are not disadvantaged by competition from VAT free imports.
In the short term there is evidence that some EU suppliers have stopped fulfilling orders to the UK because of the extra bureaucracy and cost involved.
Orders with a value over £135
For higher value orders (where the total consignment is over £135) there is a switch in responsibilities. Instead of the overseas seller charging VAT the arrangements are as for all other imports i.e. the UK buyer/importer must pay VAT and any duties to HMRC direct.
The reason for the £135 threshold is to harmonise with the threshold for relief from customs duty, thus minimising the impact on customs procedures.
For further information go to VAT and overseas goods sold directly to customers in the UK
There are changes for foreign businesses selling into the UK through online market places (e.g. Amazon). The overseas business is no longer responsible for charging UK VAT. This liability has been transferred to the online marketplace – VAT and overseas goods sold to customers in the UK using online marketplaces
In summary, the process for buying/selling goods to/from the EU is now more protracted and has the potential for delays if paperwork is not completed correctly.
No doubt adapting to the new processes will cause problems in the short term. If you have any questions at all then please do not hesitate to contact us