Keep your supply chain strong with three top tips

With manufacturing slowing and anxiety growing, reinforcing your supply chain post-Brexit has never been more important.

Many different factors can affect a supply chain, not least the complications created by the new customs and trade arrangements.

Here are our three top tips to keeping your business moving post-Brexit and beyond.

Know your business inside out

If you export or import goods to or from anywhere in the world, you already know how much has changed over the past three months.

From new customs and shipping procedures to workplace and visa changes, staying “in the know” is the key to ensuring a strong supply chain.

To support your learning, consider investing in specialist training, attending webinars, and subscribing to helpful, sector-specific newsletters to keep in the loop.

If you need specialist advice then it may be worth seeking professional advice from an accountant, such as ourselves.

Identify weak links in the supply chain

Think of the supply chain like a carefully assembled set of dominoes; if the domino behind you falls, will you fall too?

Protect your business by carrying out a comprehensive audit of the supply chain, identifying the ‘weak links’, which could disrupt the flow of goods and making the necessary improvements.

For example, can you diversity the supply chain by sourcing commonly traded commodities from multiple suppliers? Can you stock up on hard to obtain materials in anticipation of future disruption? Or can you find a new supplier based in the regional market you are dealing with?

Prepare for any eventuality

If you knew that Brexit and the coronavirus pandemic would strike again, how would you prepare differently?

By identifying how and where things went wrong, you will be much better equipped to deal with future crises.

For example, if your business struggled with the transportation and movement of goods, could a pre-approved, alternative provider come to the rescue?

While potentially more expensive, alternative hauliers could prevent your business from grinding to a halt.

If stock was your issue, it might be wise to invest in a buffer should the flow of goods suddenly stop. Yes, your cash flow will take a hit, but slower continuous trading is much better than no trading at all.

If recent events have taught us anything, it’s that it pays to be prepared for anything.

For help and advice with related matters, please get in touch with our expert Brexit advisory team today.

EU VAT One-Stop-Shop to launch in July 2021

The European Commission, in response to the challenges created by the Coronavirus pandemic, has decided to postpone its new European VAT rules for business-to-consumer (B2C) transactions until 1 July 2021.

These new rules are part of the EU’s new e-commerce package and will look to introduce a VAT One-Stop-Shop (OSS) for B2C sales.

Originally due to come into force on 1 January 2021, the main aim of this package is to simplify VAT obligations for companies carrying out cross-border sales of goods and services (mainly online) to consumers. This will ensure that VAT on is paid correctly to the Member State in which the supply takes place

The current rules

Under the current EU rules, businesses from outside of the EU are typically required to register in each of the various Member States to which they supply goods or services to report and pay EU VAT at various rates on their sales.

Businesses offering B2C digital services can already use the Mini One-Stop-Shop (MOSS) to declare the VAT due on their supplies in a single quarterly VAT return, by only registering in one EU Member State.

However, no such declarative system is available to those selling physical goods, which means that imported goods from non-EU countries with a value above €22 (£15) must register for VAT in each EU member state and make the necessary declarations.

The new rules

From 1 July 2021, the EU will create a similar One-Stop-Shop (OSS) for B2C suppliers of all services and goods, which will remove the requirement for a business to have multiple VAT registrations and reporting obligations in the EU.

At the same time, the distance sales threshold will be abolished and replaced with a common threshold of €10,000 (£8,600) throughout the EU up to which B2C EU cross-border supplies remain subject to the VAT rules of the Member State of dispatch, and above which supplies become subject to the VAT rules of the Member State of destination.

Under this new system, a single report scheme covering sales of imported goods to EU consumers up to a value of €150 (£135) and for which a VAT exemption upon import, will apply if the trader declares and pays the VAT at the time of the sale using the Import One-Stop-Shop (IOSS).

The new package of legislation from the EU will also open the possibility of paying import VAT on customs declarations via a simplified monthly payment.

Who do the new rules affect?

The new rules will affect suppliers outside the EU as follows:

Suppliers of services to EU consumers – Various VAT rates currently apply to the sale of their services depending on the nature of the supply and the place of residence of the clients or customers.

However, from 1 July 2021 businesses could use the OSS to lighten their reporting obligations. The choice of the EU Member State where they could register for the OSS will depend on where they and their customers are established or based.

Sellers of goods to EU consumers – These businesses will see changes to their reporting obligations and potentially their profits.

Where a seller is a small business selling less than €10,000 (£8,600) per annum of goods and services to consumers in other Member States, they will be able to charge domestic VAT and report their sales below this threshold in their regular domestic VAT return.

If they are a B2C seller dispatching their goods from a single EU Member State, they will no longer be required to register for foreign VAT or complete multiple VAT filings in the EU Member States where they are selling their goods. Instead, they can opt to file a quarterly return under the OSS alongside their regular domestic VAT return.

Importantly non-EU sellers, including the UK (post-Brexit) can use the OSS to register as a “non-Union” taxpayer with the tax authority of the EU Member States of their choice, except where they already have fixed establishments in the EU.

This means that they could file quarterly returns under the OSS and only file a regular domestic VAT return in just one EU Member State where they are registered, instead of across multiple states under the current rules.

In some EU member states, online marketplaces, such as Amazon, are deemed the supplier of the goods, which may mean that some online sellers could de-register for VAT in certain EU Member States if they only sell via these marketplaces, as it will be the responsibility of the marketplace to collect the VAT at the time of the sale.

Steps to consider

Here are some important steps that you may need to consider under the OSS:

VAT Compliance – The OSS should reduce compliance costs by allowing businesses to use a single VAT return and registration in just one EU member state. In some cases, it may be necessary to appoint an intermediary or fiscal representative in a member state, who will report the sales on behalf of the seller and account for the VAT.

Procedures – Sellers must update their procedures and systems to recognise the VAT status of their clients, the countries of import, dispatch and/or arrival and capture the VAT rates applicable – be aware that there are more than 80 different EU VAT rates.

Trading via online marketplaces – If you trade via an online marketplace, like eBay or Amazon, you should review your contracts with these organisations to ensure that VAT accounting responsibilities are clearly defined.

Pricing – Goods might be subject to the VAT rate of the Member State of destination of the goods, whereas up until now, it might only be the case when national thresholds are exceeded, which means that the sale price or the seller’s margin will vary. With low consignment relief due to be abolished, VAT will be due on those sales at the rate applicable in all EU countries of sale. This will also impact the price and margin of the products.

Businesses must prepare now for these changes in July to ensure they are ready to implement the OSS, should they choose to use this simplified VAT system. If you need advice on what these rules mean for you and your business, please contact us.

Commodity codes, explained

If you move goods to or from anywhere in the world, you will need to use a commodity code to classify your consignment. Here’s what you need to know.

What is a commodity code?

The UK now uses a standardised set of codes, borrowed from the World Trade Organisation (WTO) “Harmonised System”, to classify goods.

These are known as commodity codes.

Commodity codes can contain up to 14 numbers, with each number representing the type of good being transported.

For example, any goods relating to vehicles (other than railway or tramway rolling stock, and parts and accessories thereof) will come under code “87”.

If that vehicle is a non-motorised bicycle, its code would be “87 12”, as “12” is the commodity code for “Bicycles and other cycles (including delivery tricycles), not motorised”.

The next set of numbers would relate to the type of bicycle, and so on and so forth (see below).

EU and WTO rules

Some products have longer commodity codes than others, depending on what the product is, the materials used, the production method, where it comes from, and where it is going.

The UK uses the standard six-digit format adopted from the World Trade Organisation (WTO) for goods shipped anywhere outside of the EU.

Goods shipped to the EU, however, may need additional classification. This will include two additional digits relating to the Combined Nomenclature (CN) heading and up to six additional digits relating to the Integrated Tariff of the European Communities (TARIC) subheading.

You can use the UK Global Online Tariff: look up commodity codes tool to find your commodity code.

If you’re having problems classifying your goods, get in touch with our expert team for support.

Why do I need a commodity code?

Every customs declaration made in or out of the UK requires a commodity code, as it is used to determine the rate of duty and import VAT which should be paid, if the duty is suspended, whether you need a licence to move the goods, or if your goods are covered by agricultural policy, anti-dumping duties, or tariff quotas.

If you use the wrong commodity code, you may pay the wrong import duty and your goods could be seized at the border.

Get expert advice today

For help and advice classifying your goods, please get in touch with our expert Brexit advisory team.

The SME Brexit Support Fund: how do I apply and how much could I get?

The SME Brexit Support Fund will open to applications imminently. To help your business secure vital support, here’s everything you need to know.

What is the SME Brexit Support Fund?

Announced this month, the £20 million fund is designed to help small and medium-sized enterprises with changes to trade rules with the EU, such as new customs procedures, rules of origin, and VAT.

It has been widely welcomed by industry bodies, including the Federation of Small Businesses, the Institute of Directors, and Logistics UK.

Who can apply?

A successful applicant will have been established in the UK for at least 12 months before submitting an application, or currently hold Authorised Economic Operator status, and:

  • not have previously failed to meet its tax or customs obligations
  • have no more than 500 employees
  • have no more than £100 million turnover; and
  • import or export goods between Great Britain and the EU, or moves goods between Great Britain and Northern Ireland.

The business should also:

  • complete (or intend to complete) import or export declarations internally for its own goods

OR

  • use someone else to complete import or export declarations but requires additional capability internally to effectively import or export (such as advice on rules of origin or advice on dealing with a supply chain).

How much can I get?

SMEs can apply for grants of up £2,000.

What can I spend the grant on?

The cash can be used to access specialist training and support on a range of topics, including:

  • how to complete customs declarations
  • how to manage customs processes and use customs software and systems
  • specific import and export related aspects including VAT, excise and rules of origin.

Notably, the grant can also be used to source professional advice so your business can “meet its customs, excise, import VAT or safety and security declaration requirements” – meaning the grant could be used to offset some of your accounting costs.

How and when can I apply?

The SME Brexit Support Fund will be administered through the pre-existing Customs Grant Scheme and will open for applications from March. We will notify you as soon as the application stage is open.

Get expert advice today

For help and advice preparing and submitting your application, please get in touch with our expert Brexit advisory team today.

What you need to know about the end of the Northern Ireland grace period

It has been revealed that the European Commission is unlikely to accept the Government’s proposition of a two-year extension to the Northern Ireland grace period.

With reports suggesting that the Union will consider a three-to-six-month extension at best, what does this mean for businesses transporting goods into Northern Ireland?

What is the Northern Ireland grace period?

Announced hours before the end of the Brexit transition period, the Northern Ireland grace period exempts businesses transporting certain goods – such as meat and dairy products – into Northern Ireland from customs processes until 01 April 2021.

When will the grace period end?

The grace period is unlikely to be extended for a further two years. Reports suggest that the grace period will be extended by three months, putting the end date in July, to a maximum of six months, moving the end date to October.

What will happen at the end of the grace period?

Whether it is July, October, or somewhere in between, the end of the grace period will bring the Northern Ireland protocol into force.

The protocol was originally imposed to prevent controlled goods from moving into the European Union via Northern Ireland without following the correct customs processes.

This means certain goods coming into Northern Ireland ports will become subject to strict EU customs rules, despite the Brexit deal allowing for tariff-free trade.

The processes and new requirements include:

  • Firms sending products of animal origin – such as meat, fish, eggs and dairy – to Northern Ireland will be legally required to complete Export Health Certificates (EHC) to ensure they meet EU standards. A vet or similar professional must sign off every consignment.
    • Some meat products, like sausages, have a six-month grace period before customs processes come into force.
  • Firms will need to complete customs declarations for commercial parcels entering Northern Ireland.
  • Personal parcels carrying goods valued at £135 or less do not need to be declared, but parcels containing excise goods, such as alcohol, do.
  • More information on all of the new customs processes can be found here.

Get expert help today

To discover how these changes will affect your business, please get in touch with our expert Brexit advisory team today.

£2,000 grants for Brexit-related training or professional advice announced

The Government has announced the launch of a £20 million SME Brexit Support Fund, intended to help SMEs with the new rules that apply to trading with the EU following the end of the Brexit transition period.

The fund offers grants worth up to £2,000 to enable businesses who trade only with the EU and who are, therefore, new to importing and exporting to access support, including training and professional advice to ensure they can continue trading with the EU.

This includes training on:

  • How to complete customs declarations
  • How to manage customs processes and use customs software and systems
  • Specific import and export related issues, including VAT, excise and rules of origin.

Additionally, the grant can be put towards professional advice relating to meeting customs, excise, import VAT and safety and security declaration requirements.

Businesses are eligible for the fund if they:

  • have been established in the UK for at least 12 months before submitting an application or currently hold Authorised Economic Operator status;
  • have not failed to meet tax or customs obligations in the past;
  • have no more than 500 employees;
  • have turnover of no more than £100 million; and
  • import or export goods between Great Britain and the EU or between Great Britain and Northern Ireland.

They must also meet one of the following conditions:

  • Complete (or intend to complete) import or export declarations for their own goods; or
  • Use someone else to complete import or export declarations but need additional capability to effectively import or export.

Details of how to apply are expected in the coming weeks.

Between April and July this year, new important control measures will be introduced in three stages, after which businesses will need to complete import declarations. The new funding will assist businesses in preparing for these changes.

Please contact us today for advice on continuing to trade with the EU.

Download our latest Brexit Guide to understand the complexities of post-Brexit VAT

Thousands of businesses across the UK have been having to get to grips with new rules surrounding VAT, imports and exports since the Brexit transition period ended at the start of this year.

To help, our experienced team have put together a detailed guide on post-Brexit trade and the new rules around VAT on imports and exports, which covers:

  • Import VAT
  • The impact on regular services
  • The importance of fiscal representatives in the EU
  • The rules of origin
  • The sale of digital services in the EU
  • VAT registration in the EU.

If you are finding it difficult to manage your VAT affairs as a result of Brexit or would just like to know more about how the EU-UK free trade and withdrawal agreements affect goods and services, download this guide today.

Don’t struggle in silence, if you need assistance with VAT on imports, exports or services sold in the EU, please speak to our team.

The General Export Facility, explained

Launched in December last year, the General Export Facility is designed to help businesses export their goods and services overseas.

But what is the scheme? And how could it help your business?

Overview

The General Export Facility (GEF) is a guarantee scheme run by the Government’s export credit agency, UK Export Finance (UKEF).

The facility supports small and medium-sized enterprises (SMEs) by providing partial (80 per cent) guarantees to incentivise banks to finance international trade operations.

The scheme can guarantee cash facilities, such as trade loans, or contingent obligation facilities, such as bonding and letter of credit lines, with maximum repayment terms of up to five years.

UKEF says the scheme has helped “thousands of businesses” to fulfil multiple export contracts, pay for labour costs, build their inventory, and ease cash flow constraints.

How much can I get?

The General Export Facility will support facilities valued up to £25 million.

How can the scheme benefit my business?

The scheme helps businesses negotiate better terms and rates of interest on finance facilities than they could achieve otherwise. This will allow your company to use working capital to grow and expand international trade operations, rather than to pay debts.

And unlike other guarantee schemes, GEF traders do not need to evidence any individual export contracts, meaning they can “focus on their overall growth without worrying as to whether an export opportunity will be deemed supportable or not”.

Which banks participate in the scheme?

There are currently five participating banks: Barclays, HSBC, Lloyds Banking Group, The Royal Bank of Scotland, and Santander.

Is my business eligible?

A successful applicant will satisfy the following criteria:

  • in any one of the last three financial years, at least 20 per cent of their annual turnover has been made up of UK export sales; OR
  • in each of the last three financial years, at least five per cent of their annual turnover has been made up of UK export sales.

And declare that:

  • they have premises in the UK
  • they have employees in the UK
  • they pay UK or Isle of Man/Channel Islands National Insurance Contributions or Corporation Tax; and
  • they manufacture goods, deliver services or produce intangibles from the UK, which would (if required) qualify for a UK Chambers of Commerce Certificate of Origin.

For support applying for export finance, please get in touch with our expert Brexit advisory team today.

VAT after Brexit: what you need to know

Following the end of the transition period on 1 January 2021, many businesses are taking on the challenge of overseas accounting for the first time.

To support your business, we’ve answered some of the most common questions we’ve received over the past month.

Is VAT applicable on the purchase of a service from EU countries?

Providing the place of supply is the UK, there are no changes to the purchase of services from the single market. You should give your UK VAT number to the supplier so that they do not charge VAT. Any VAT due will be dealt with as if you had supplied the services yourself.

Is VAT applicable on the purchase of goods from EU countries?

Goods purchased from the single market are now considered “imports”. This means the VAT applicable depends on who is responsible for declaring the goods and paying import VAT. You must give the supplier your UK VAT number and EORI number to ensure you are not charged twice. The postponed VAT accounting scheme has been introduced to help UK businesses pay VAT without disrupting cash flow.

Is VAT applicable on the purchase of a service from non-EU countries?

As we have left the single market, the treatment of services from EU and non-EU countries are now the same.

Is VAT applicable on the purchase of goods from non-EU countries?

Like services, the treatment of goods from EU and non-EU countries are now the same.

Is VAT applicable on the sale of services to EU countries?

There are currently no changes to the treatment of services sold to the EU. You should obtain your business customer’s VAT number and not charge any UK VAT on the supply.

Is VAT applicable on the sale of goods to EU countries?

Goods exported to the single market are now considered “exports”. This means the VAT applicable depends on who is responsible for declaring the goods and paying import VAT. Sales from the UK will be zero-rated if you can prove that the goods have been removed from the UK. If you are responsible for the declaration of goods and paying import VAT, you may be required to register for VAT in the EU country.

What is the non-union VAT Mini One Stop Shop?

Replacing the UK VAT Mini One Stop Shop (MOSS), the non-union VAT MOSS will allow exporters of digital services to the EU to account for VAT in just one country, rather than in all countries of sale. Businesses who exported or plan to export digital goods in January must register before 10 February to benefit from the scheme.

How can I claim a VAT refund in the EU?

UK businesses will no longer be able to recover VAT incurred in other EU countries using an electronic system. VAT refunds can instead be reclaimed using the existing refund system for non-EU businesses.

How can I check if an EU VAT registration number is valid?

Use the EU VAT Registration Number Validation service to check if a customer or supplier’s VAT number is valid. You can no longer check a UK VAT registration number using this service, but HMRC offers a similar service for checking a UK VAT registration, which can be found here.

For help and advice on related matters, please get in touch with our expert Brexit advisory team today.