As you can imagine, there is a lot of uncertainty regarding what happens if there is a ‘No deal’ Brexit at the end of October.
From a VAT perspective, whilst there is very little clarity from the tax offices, there is clear guidance for businesses based on the assumption that the UK will be treated exactly the same as other non-EU countries.
Most importantly, it means any goods coming into the UK (from the EU or otherwise) will be treated as imports and subject to VAT. (However, the UK will almost certainly introduce an import VAT deferment scheme similar to those that exist in Netherlands and Belgium so that importers don’t have to bear the brunt of the cash flow impact).
All goods going from the UK into the EU will have VAT on them in the destination country. This creates a cash-flow impact which did not exist when the UK was part of the single market.
For example, if the UK company is the exporter only, they will not have to worry (since the EU importer will have to pay VAT on their side). However, if the UK company is also importing the goods into the EU country, then the UK company will have a foreign import VAT cost to consider. (Similar to above, it is likely that EU countries who have a high volume of imports from the UK will therefore start implementing import VAT deferment schemes – but this is a logical presumption, not an official opinion).
Importers who have been using a single EORI for all imports across the EU might need to now obtain a second EORI number as HMRC has specifically said all imports into the UK must be done using a UK-issued EORI number.
UK entities who are registered for VAT in the EU might need to appoint a fiscal representative (Belgium and Greece have issued statements explicitly confirming this, it is likely others will follow). This means if you have an existing VAT number it might need to be “upgraded” to fiscal representation to ensure compliance.
Given these changes, it is probable that your business may need to use a different supply chain model (perhaps delivering orders from a different country to avoid these complications). Changes to the supply chain will inevitably result in new VAT compliance obligations.
Vatglobal is happy to assist with Brexit guidance based on your specific supply chain and transactions (between the EU and UK). We regularly provide technical and practical advice that should be considered so that your business is not caught out if the hard-Brexit happens in a few weeks. Either way, since some form of Brexit will eventually happen (or will it?) – it is worth understanding how it will impact your business so you can take the necessary action to stay ahead of the game.
Gareth is an international VAT expert with over 15 years experience working in VAT compliance. For more insight from Gareth click here.