Brexit and VAT - How will it Affect your Business?

Following the end of the Brexit transition period on December 31st 2020, the UK will no longer be a part of the Customs Union.

So what does this mean? In short, any goods leaving the UK and bound for Europe will then be classed as exports, and vice versa. And when goods cross the customs border, import VAT and Customs Duty will need to be paid.

So where do you start when it comes to preparing for Brexit? Lets look at some of the main considerations.

What does your business need to have in place?

Economic operator registration identification (EORI) numbers are currently needed for EU transactions, and will still be required for imports and exports. However, after Brexit, there will need to be separate EORI numbers for both the UK and the EU.

Your business will also need to confirm its Commodity Codes, which determine how much duty is paid on a particular product. Each import or export declaration you produce will need to have a separate code for each item.

You’ll need to ensure your certifications fall within the new rules, and that your goods will pass EU regulatory checks - particularly important with products of animal origin. These will require an export health certificate and entry to the EU through a designated Border Inspection Post.

Drivers will need to carry vehicle documents for legally crossing international borders, a written system for securing your vehicle, and things like tachograph charts and insurance documents. They’ll also need:

• A copy of your export licences.
• A movement reference number (this would be in the event of a no-deal Brexit)
• a movement reference number or LRN (If the export falls under the Common Transit Convention)
• An ATA Carnet document if moving goods out of the UK temporarily
• A TiR Cabinet document, if moving goods in a sealed load compartment

You will also need to decide how you’re going to charge VAT to your EU customers. Post Brexit, shipping items above €22 to the EU will mean import VAT must be paid and duty may be incurred on items valued above €150. And crucially, you’ll need to plan for upcoming duty and VAT Payments, and how best to manage these costs.

VAT Refunds

HMRC has confirmed that access to the EU VAT refund system will end on 31st March 2021. Up until this date, firms in the UK (and those in the EU) will have access to the existing system to view and amend any claims relating to VAT incurred pre Brexit.

Any claims relating to VAT that are incurred after this date will have to be made manually and individually to the relevant tax authorities concerned.

Opportunities and Risks for UK Business

There will be challenges involved for smaller businesses in order to be ready for Brexit, who may lack the scale and infrastructure of larger organisations and incur higher costs and greater exposure to risks.

It may be hard to see a silver lining, particularly with all of the negative press and worry surrounding Brexit. However, this forging of new trade relationships with both global and emerging markets could be considered an opportunity for entering a new phase of British business and trade, and a move towards the future of export and import.

VAT is one of the most important and complicated tax systems imposed on businesses - and this, as we’ve seen, is being exacerbated by Brexit. DNS Accountants specialise in providing VAT advice, and offer a specialist consultancy service.

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.