Are you VAT and Customs ready for Brexit? Get Brexit ready with our Brexit VAT/Customs impact review

Wednesday, May 22, 2019

by Nick Ryan

Given the resounding negative reaction to Theresa May’s “new deal” WAB it is now becoming more evident that the road to Brexit will be a hard one. Brexit, whether hard or soft, has significant implications for businesses in relation to VAT and Customs. We have been working, with a number of businesses in considering the implications of Brexit, identifying a range of issues that require careful planning in order to minimise the impact on margins through the implementation of strategic changes.
With October 2019 not too far away, now is the time to contact us to discuss your requirements for a Brexit VAT Impact review to facilitate a planned Brexit transition.
Contact Nicholas Ryan @ +35383340324 or, advice@thevatpractice.ie

Meanwhile, here are some of the examples on how Brexit can impact a business:

Irish business supplies goods from Ireland to UK business customer:
• The supply is no longer treated as an intra-EU dispatch of goods with VAT accounted for under the reverse charge accounting procedure.
• The supply remains zero-rated for VAT in Ireland though as an export of goods.
• The Irish supplier is no longer required to complete Intrastat and VIES declarations.
• The Irish business will have to initiate changes to its systems to enable application of the appropriate Customs declaration procedures.
• The supply will be an import of goods for the UK customer.
• Customs duty tariffs and import VAT will apply (Note the UK government has confirmed that it will introduce postponed accounting for import VAT as a measure to alleviate cash flow issues for UK businesses suddenly placed in an importer position).
An interesting footnote for supplies of goods to UK businesses where the items are small and sent by parcel – HMRC has confirmed that Low Value Consignment Relief will not be extended to parcels arriving into the UK from the EU thereby being subject to UK VAT, this VAT liability rests with the supplier and may result in additional administrative requirements for Irish businesses whereby they are required to register with HMRC to facilitate collection of the VAT due. It is understood that this process may be value based and only apply to parcels with a value of less than £135.

Irish business supplying goods to UK customers under a consignment stock arrangement, stock held in the UK:
• The use of consignment stock schemes can negate the requirement for the supplier to register for VAT in the EU Member State where the stock is held.
• This concession will not apply under a hard Brexit.
• The Irish business will be required to register for UK VAT in order to manage the holding of stock in the UK.
• This will also create a self supply export of goods from Ireland.
• This will result in a self supply import of goods in the UK and result in additional costs in Customs Tariffs – Note the current EU Tariffs may no longer apply and tariffs may be calculated at WTO levels.
• The Irish business will incur additional costs in both administering the UK VAT registration, managing the import of the goods and the associated customs tariffs.
Irish business supplying goods to a German customer, product sourced from a UK third party supplier:
• Under current EU VAT regulations businesses in the EU can avail of the Triangulation Simplification procedure whereby the supplier is not required to register for VAT in either the customers’ EUMS or the EUMS from where the product is sourced.
• As the UK will no longer be a member of the Single Market then Triangulation can no longer apply.
• The Irish business will be required to register for VAT either in the UK or Germany.
• If the UK, then the onward supply to the German customer will be a zero-rated export BUT the German customer will incur additional costs in administering the importation of the goods and customs tariffs.
• Where the Irish business elects to register in Germany then it will bear the additional import costs thereby impacting on its margin.

The above scenarios cover some of the VAT implications facing Irish and UK businesses where a no deal Brexit to occur. There will be an impact in other specific areas such as the travel sector where it remains unclear whether the Tour Operator’s Margin scheme would remain. Suppliers of digital services to consumers will also face issues in the application of MOSS as the supplier’s status may change.
Distance sellers may also need to consider the impact of a no deal Brexit to their current basis of operation where they supply Irish consumers form the UK and vice versa. With the possible additional cost in customs tariffs and VAT the cost to the consumer will increase which could result in a negative impact to the supplier’s competitive edge.

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