What impact will Brexit have on the economy and businesses? Well, following this crazy year, no one really knows. But there are a few things we can be certain of… businesses need to be ready for the transition out of the European Union. This is particularly so when it comes to VAT, which will change for imports and exports.
The changes are fairly simple but need understanding. They will make an impact on millions of people, employees and business owners. Hopefully this brief guide will help you navigate Brexit.
The first thing to be certain of is that Brexit is definitely happening – following months and even years of uncertainty, voting, politics and controversy. The current transition period is due to end on 31 December. UK government leaders have informed the European Commission that the UK will neither accept or seek an extension to this.
Brexit and VAT
Expect consequences when it comes to VAT, border control and customs duty regardless of whether politicians reach a deal or use WTO terms. In most cases, this will happen straight away. This will impact all businesses that trade with the EU.
Exports and imports will replace EU dispatches and acquisitions. But zero-rating for the export of goods will exist if the relevant conditions are met. At present, imported goods are liable for import VAT and potentially customs duty.
To soften the blow, HMRC is scrapping the current physical charging of import VAT. Instead, import VAT will be accounted for by adjustments on VAT returns. This will be part of a new process called postponed VAT accounting (PVA).
Be ready for 1 January
f your business is registered for VAT in the UK, you need to account for import VAT on your VAT return for goods imported from anywhere in the world from 1 January. This means you’ll declare and recover import VAT on the same VAT return, rather than having to pay it up front and recover it later.
If the goods you import are for use in your business you can account for import VAT. Remember, you need to include your EORI number, which starts ‘GB’ on your customs declaration or if you include your VAT registration number on your customs declaration.
You can also account for import VAT on your VAT return when you release excise goods for use in the UK – also known as ‘released for home consumption’. This includes when goods are released from an excise warehouse after being in duty suspense since the point of import.
You will not be able to account for import VAT on your VAT return if you are authorised to use simplified declarations for imports and you complete your simplified frontier declaration before January 1.
This will be the case even if you complete your supplementary declaration after this date.
If it sounds complicated, we can help, so please get in touch if you need any advice.