Alex Salmon of Stephenson Smart

News: Is your business ready for the new rules after Brexit

7th December, 2020, Alex Salmon

Is your business ready for the new rules after Brexit?

If you trade with countries in the EU, then you need to be prepared for the end of the Brexit transition period on 31 December 2020. After this date, there will be changes to customs procedures and VAT reporting.

Customs Procedures

A new customs border will be created between the UK and the EU - regardless of whether a Free Trade Agreement is reached or not. This means that full customs procedures will be required for goods crossing the UK/EU border and customs declarations for imports or exports will have to be submitted to HMRC. If your business does not have the expertise to manage this new paperwork, you can employ an agent to assist you. This will come at a cost to your business, but if goods turn up at the border without the right paperwork, they will be stuck in the port.

There is some initial support from HMRC when the EU transition period ends. The customs grant scheme has been changed to allow more businesses access to the funding. Traders who are new to customs can apply for up to £1,000 to support with the initial costs of basic customs training. Authorised Economic Operators who have had a base in the UK for less than 12 months can also apply.

The co-funded training project grant allows customs intermediaries, as well as traders who complete their own declarations, to receive up to €2 million.

Grants will be issued on a first come, first served basis, with the closing deadline being 30 June 2021. This may well be earlier if all available funding has been allocated before this date.

VAT reporting

Implications in respect of VAT need to be considered too. How will VAT be charged on trade with the remaining 27 member states?

In theory, UK VAT could be removed altogether. In reality, this is very unlikely to be the case.

The reporting requirements will change as a result of the UK becoming a ‘third country’ in the eyes of its relationship with the EU though.

Currently, zero-rating is likely to be applicable when goods are exported from the UK to the EU (so long as a valid VAT number is held for the EU customer and shown on the sales invoice, along with proof of export etc.) due to the trade agreement. Reporting requirements currently consisting of an EC Sales list and Intrastat, where thresholds are exceeded.

From 1 January 2021, assuming no special relationship is in place, UK VAT would not need to be charged, meaning zero-rating would still be applicable (proof of export would be required as is currently the case).

However, an import declaration will be required with import VAT and customs duties likely to be payable on importation.

UK businesses (as well as EC businesses trading in the UK) will need to consider how it will clear and pay import VAT and duty on goods both entering the UK and going from the UK to the EC.

A UK seller may well have to register for VAT in the EU country of where the goods are exported should the buyer not act as the importer. It should be noted that VAT rates and thresholds vary from country to country.

Some good news for those not fond of forms at least - no EC Sales list or Intrastat sales reports will be required in the UK, as things stand.

This has been an incredibly challenging year for businesses, who have already seen a huge amount of interruption to their day-to-day management. Having to deal with the changes that come with Brexit have, understandably, been pushed to the side. However, if your business has any interaction with countries in the EU it is very important to take some time now to understand the changes that will need to be made to ensure that your business can continue to operate.

7th December, 2020, Alex Salmon

Is your business ready for the new rules after Brexit?

If you trade with countries in the EU, then you need to be prepared for the end of the Brexit transition period on 31 December 2020. After this date, there will be changes to customs procedures and VAT reporting.

Customs Procedures

A new customs border will be created between the UK and the EU - regardless of whether a Free Trade Agreement is reached or not. This means that full customs procedures will be required for goods crossing the UK/EU border and customs declarations for imports or exports will have to be submitted to HMRC. If your business does not have the expertise to manage this new paperwork, you can employ an agent to assist you. This will come at a cost to your business, but if goods turn up at the border without the right paperwork, they will be stuck in the port.

There is some initial support from HMRC when the EU transition period ends. The customs grant scheme has been changed to allow more businesses access to the funding. Traders who are new to customs can apply for up to £1,000 to support with the initial costs of basic customs training. Authorised Economic Operators who have had a base in the UK for less than 12 months can also apply.

The co-funded training project grant allows customs intermediaries, as well as traders who complete their own declarations, to receive up to €2 million.

Grants will be issued on a first come, first served basis, with the closing deadline being 30 June 2021. This may well be earlier if all available funding has been allocated before this date.

VAT reporting

Implications in respect of VAT need to be considered too. How will VAT be charged on trade with the remaining 27 member states?

In theory, UK VAT could be removed altogether. In reality, this is very unlikely to be the case.

The reporting requirements will change as a result of the UK becoming a ‘third country’ in the eyes of its relationship with the EU though.

Currently, zero-rating is likely to be applicable when goods are exported from the UK to the EU (so long as a valid VAT number is held for the EU customer and shown on the sales invoice, along with proof of export etc.) due to the trade agreement. Reporting requirements currently consisting of an EC Sales list and Intrastat, where thresholds are exceeded.

From 1 January 2021, assuming no special relationship is in place, UK VAT would not need to be charged, meaning zero-rating would still be applicable (proof of export would be required as is currently the case).

However, an import declaration will be required with import VAT and customs duties likely to be payable on importation.

UK businesses (as well as EC businesses trading in the UK) will need to consider how it will clear and pay import VAT and duty on goods both entering the UK and going from the UK to the EC.

A UK seller may well have to register for VAT in the EU country of where the goods are exported should the buyer not act as the importer. It should be noted that VAT rates and thresholds vary from country to country.

Some good news for those not fond of forms at least - no EC Sales list or Intrastat sales reports will be required in the UK, as things stand.

This has been an incredibly challenging year for businesses, who have already seen a huge amount of interruption to their day-to-day management. Having to deal with the changes that come with Brexit have, understandably, been pushed to the side. However, if your business has any interaction with countries in the EU it is very important to take some time now to understand the changes that will need to be made to ensure that your business can continue to operate.


Alex Salmon of Stephenson Smart

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