How can your business prepare for customs and VAT after Brexit?

We are now less than one month away until the UK officially leaves the European Union. For businesses, this means new processes, protocols and procedures.

In this blog, we are going to explore how your business can approach just two of these issues: customs and VAT.

Here’s what you need to know.

Customs

After the UK leaves the EU on 31 December 2020, the Government will be free to impose its own customs and VAT regimes.

Until now, the UK and the EU have shared the same customs and VAT schemes, which made moving goods between the UK and the EU seamless and simple.

However, there are now a set of actions your business must do if it is to continue trading smoothly and avoid disruption. This includes:

  • Hiring or training a customs intermediary to complete and submit declarations
  • Applying for a duty deferment account, enabling duties to be paid once a month rather than on individual consignments
  • Preparing to pay or account for VAT on imported goods
  • Ensuring you have International Driving Permits, and
  • Applying for a GB Economic Operator Registration and Identification (EORI) number.

If you are a business who imports or exports products overseas, you may be entitled to grant funding to cover the cost of recruiting, training and adapting your business to the new demands of global trade. For more information, get in touch with our expert team.

VAT

While most UK businesses will be able to rely on specialist customs intermediaries to process goods, VAT will likely prove more difficult.

The VAT rules around importing and exporting goods to and from the single market will change after the end of the transition period. This includes when and where VAT should be accounted for.

Although VAT will now be payable on import on goods from every country (including the EU), the Government will introduce a new “postponed VAT” accounting regime to help businesses avoid cash flow issues. This scheme will enable you to account for VAT on imported goods on your next VAT return and goods can be released from customs without the need for immediate payment.

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

UK launches points-based post-Brexit immigration system

The UK’s new points-based immigration is now live to help businesses as they prepare for the end of the Brexit transition period on 31 December 2020.

The new system outlines who can work in the UK once the free movement agreement with the EU ends on 1 January 2021.

There are several new Immigration categories under the new system, which include routes for international students and graduates, skilled workers with job offers and highly skilled experts without job offers.

The new system applies to all individuals who intend to work in the UK, whether an EU citizen or other foreign national. Applications for skilled worker visas will be judged based on a points system, which is similar to existing systems that operate in countries like Australia.

Under the skilled worker route, points are awarded for various factors, such as having a job offer at the appropriate skill level in an eligible occupation, knowledge of English and a salary threshold, which will typically be at least £25,600.

Where the applicant’s salary is below £25,600 but above £20,480, they may be able to rely on an exception to make an application.

The cost of applying for a visa will be between £610 to £1,408 and applicants must be able to demonstrate that they have sufficient means to support themselves.

Employers looking to recruit under the new system will need to obtain a sponsor licence to be able to employ individuals from outside the UK.

At the same time, applications have also opened for the Global Talent, Innovator and Start-Up visas designed to attract people with exceptional talent and expertise, particularly in the fields of arts and culture, engineering, science, technology and culture. New rules for international students also came into force from October 2020.

The new visa system does not apply to EU citizens already living in the UK by 31 December. Instead, they should apply to the EU Settlement Scheme. They have until 30 June 2021 to acquire either settled or pre-settled status.

EU citizens that are successfully accepted into the EU Settlement Scheme will be able to continue living and working in the UK.

The new rules do not apply to Irish citizens, who do not need to apply to the scheme or apply for a visa come to the UK, as the UK and Ireland are both a part of the Common Travel Area.

Full details of the new visa and immigration system, including the application process, can be found by clicking here.

Business Secretary writes to professional services sector ahead of end of Brexit transition period

The Business Secretary has written to the professional and business services sector warning them about the actions they need to take to prepare for the end of the Brexit transition period.

With just a month to go, the letter, titled Are You Ready For New Rules For Business With The EU, sets out the key steps businesses in industries such as financial services and legal need to take ahead of the transition deadline.

According to the Business Secretary Alok Sharma, businesses can avoid interruption when the transition period ends on 1 January 2021 by taking the following actions:

  • Get your professional qualifications recognised by EU regulators to be able to practice or service clients in the EU. Professionals should start this process early to avoid disruption.
  • Check if a visa or work permit is required to travel to the EU for work purposes and apply if necessary. You may face delays or refusal at the border should you travel without the correct documentation.
  • Be prepared on data protection and data transfers. Should the UK fail the EU data adequacy test, UK businesses will need to invest in additional data safeguards to process data from the EU.
  • If you are planning to recruit from overseas from 1 January 2021, you will need to register as a licensed visa sponsor. UK businesses cannot legally hire people from outside the UK without one.

Writing to businesses, Mr Sharma said: “There is just over a month to go until the end of the transition period and there will be new rules to follow from 1 January 2021 onwards. As Business Secretary, I urge you to act now to avoid your business operations being interrupted when the transition period ends.

“These are challenging times, but the transition period is ending on 31 December 2020 and there will be no extension. Unless you take action, there is a risk your business operations will be interrupted. The Government will be there to help you to take advantage of the many new opportunities that being an independent trading nation will bring.”

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

Access to European Union VAT refund system to end on 31 March 2021, HMRC confirms

HM Revenue & Customs (HMRC) has confirmed that access to the European Union VAT refund system for expenses incurred before 01 January 2021 will cease on 31 March 2021.

After this date, UK businesses wishing to claim a VAT refund will have to do so manually through the relevant member state’s VAT system.

Any expenses incurred after the Brexit transition period will also need to be reclaimed using the process for the EU member state where you’re claiming a refund.

For EU businesses not registered for VAT in the UK, the UK will continue to accept refund claims through the EU VAT refund system for VAT charged in the UK before 01 January 2021 until 31 March 2021.

Any claims after this date, or claims for expenses incurred after the Brexit transition period ends, should be filed using the manual process for businesses outside the UK.

To quickly find information about each European member state’s tax refund protocols, please click here.

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

Brexit: How to claim grant funding to help cover the costs of completing new customs declarations

If you are a business who imports or exports products overseas, you may be entitled to grant funding to cover the cost of recruiting, training and adapting your business to the new demands of global trade.

The grant funding scheme comes ahead of the end of the Brexit transition period, after which the UK will be free to implement its own trade policies. This will, however, complicate the import and export procedures of many products at the border.

If grant funding could help your business meet this challenge, here’s what you need to know.

What can I get funding for?

The grant funding initiative could help cover the costs of:

  • Recruitment, training and IT to help your business to complete customs declarations. This includes the salary costs of new employees, where the new employee started on or after 12 June 2020 and intends to help your business complete customs declarations
  • Co-funded training project to help your business complete customs declarations, and/or
  • Trader-training to understand customs.

Is my business eligible?

To apply, your business must:

  • be currently established in the UK
  • have been established in the UK for at least 12 months before submitting the application or hold Authorised Economic Operator status, and
  • not have previously failed to meet its tax obligations.

And meet at least one of the following:

  • complete or intend to complete customs declarations on behalf of your clients
  • be an importer or exporter and complete, or intend to complete, declarations internally for your own goods
  • be an organisation which recruits, trains and places apprentices in businesses to undertake customs declarations, and/or
  • trade with the EU and do not intend to complete your own declarations, but want to undertake customs training.

How much funding is available?

  • Up to £3,000 towards the costs of recruitment for each new employee and up to £12,000 to cover the salary costs of each new employee
  • 100 per cent of the actual costs of externally-provided training for your employees, up to a limit of £1,500 for each employee on the course
  • Up to a limit of £250 for each employee on an internal course, and/or
  • 100 per cent of the costs relating to your IT expenditure to improve the efficiency of making customs declarations.

For help and advice making a claim, please get in touch with our expert Brexit advisory team today.

VAT after the Brexit transition

One of the key issues to consider before and after the Brexit transition period ends is VAT. Much of the UK’s current VAT rules and regulations are derived from EU VAT directives or existing customs arrangements.

This has ensured that the UK’s VAT rules are in-sync with the EU, but this is likely to change once the transition period ends.

Changes to customs arrangements and rules will mean that important processes could be altered overnight and so businesses must be prepared.

Import VAT

From 1 January 2021, goods that move into the UK from the EU will be considered imports, meaning import VAT and customs duties will be payable and customs declarations will need to be made.

To help UK businesses, the Government has confirmed that they can use a postponed accounting system. This allows for import VAT to be accounted for and paid via the usual VAT return instead of at the border, which will lead to an improved cash flow position for many businesses.

This applies to all goods imported by VAT registered importers to the UK, including those from the EU. In most cases, import VAT should be recoverable by businesses, but other duty costs may not.

Accounting for import VAT on your VAT return

Under the postponed accounting system, businesses will have to account for import VAT via their VAT return if the goods they import are for use in their business.

The business must include its EORI number starting with ‘GB’ on its customs declaration and their VAT registration number if it is needed. Businesses that do not have an EORI number can obtain one online by clicking here.

Businesses account for import VAT on a VAT return when they submit a customs declaration that releases goods into free circulation from one of the following special customs procedures:

• customs warehousing
• inward processing
• temporary admission
• end use
• outward processing
• duty suspension.

A business can only account for import VAT on their VAT return once they release excise goods for use in the UK, which is commonly referred to as ‘released for home consumption’.

If the business imports goods that are not controlled into Great Britain from the EU between 1 January and 30 June 2021, they must also account for import VAT on their VAT return, even if they delay the customs declaration or use a simplified customs declaration.

Controlled goods for transitional simplified procedures include excise goods, such as alcohol or tobacco, and some goods that need a licence to be imported.

For further guidance on how to account for import VAT on your VAT Return from 1 January 2021, please read the latest official guidance here.

Duty deferment

Some businesses may be able to account for VAT using a duty deferment account, which allows a company to delay paying most customs charges, including customs duty, excise duty and import VAT.

Through this account, a business can make a single payment each month via direct debit instead of paying for each consignment separately.

The scheme is open to importers or customs agents and freight handlers that work for importers and have an approved deferment guarantee or waiver in place.

Further details on duty deferment and how to apply for an account can be found here.

Low-value imports

Imported goods in a consignment not exceeding a value of £135, excluding specific excise goods and gifts, will not be subject to import VAT at the border.

Low-value consignment relief will be withdrawn and businesses should charge VAT on these goods as if they were supplied in the UK.

These supplies should be accounted for on the UK VAT return and businesses must then settle any VAT liabilities using the standard VAT payment procedures.

Therefore, businesses selling goods to be imported into the UK with a value not exceeding £135 will be required to charge and collect any VAT due at the time of sale.

For UK VAT registered businesses importing goods in a consignment not exceeding £135 in value that has not been charged VAT at the time of purchase they can account for this VAT on their VAT return under the usual reverse charge method.

Place of supply

To ensure all VAT is paid correctly, businesses will need to determine the country where a supply takes place for VAT purposes.

At the moment the place of supply rules are applied almost identically across the EU and it is expected that the UK will retain similar rights after the transition period ends to reduce disruption.

However, businesses should be aware that they may continue to create VAT liabilities in other EU member states and it may mean that businesses have to obtain multiple EU VAT registrations for each country.

Further clarity on this is expected in future government guidance and may be affected by the outcome of the ongoing trade deal negotiations.

Reclaiming VAT in the EU

Currently, UK firms incurring VAT in EU countries can claim VAT back (subject to national rules) via HM Revenue & Custom’s dedicated refund portal.

That arrangement will remain in place until 31 March 2021, after which time, there is currently no provision in place to claim for VAT incurred in 2020, under the terms of the Withdrawal Agreement.

Impact on services

Post-Brexit there should be minimal impact on the supply of services. Business to business services are generally treated as though they are supplied where the customer is located and that customer must account for local VAT.

This will mean that for UK service suppliers they will continue to not charge UK VAT to European businesses. For businesses to consumer supplies, UK VAT rules generally applies and this is likely to remain unchanged.

When receiving services, it is expected that UK businesses will still have to apply a reverse charge to the receipt of services from non-UK suppliers. This would ensure that there is no competitive advantage from sourcing services via non-UK suppliers.

Here to help

As you can see, the new arrangements regarding VAT post-Brexit are complex and require businesses to undertake many new tasks and procedures.

If you would like support with your VAT affairs we are here to help. To find out more about our dedicated VAT services, please contact us

Data protection and Brexit: what you need to know

Small and medium-sized enterprises (SMEs) will have to take extra precautions when using personal data after the Brexit transition period comes to an end, a major regulator has warned.

The guidance, published by the Government and Information Commissioner’s Office (ICO), comes as the UK prepares to officially leave the EU on 31 December 2020.

To help your business get up to speed with the new demands of processing personal data, we’ve summarised the key points you need to know about below:

What is personal data?

According to the guidance, personal data is defined as any information that can be used to identify a “living person”. This includes names, delivery details, IP addresses, or HR data such as payroll details.

What you need to do if you receive data from the EU

A data adequacy assessment of the UK is currently underway. If the UK is approved before the end of the transition period, the free flow of personal data from the EU/EEA to the UK will be allowed to continue without any further action by organisations.

If the assessment runs into next year, however, organisations will be required to put in place alternative transfer mechanisms to ensure that data can continue to legally flow from the EU/EEA to the UK. For example, your organisation may need to have Standard Contractual Clauses (SCCs) in place with EU counterparts in order to legally receive personal data from the EU.

What you need to do if you send personal data to the EU

There are currently no planned changes to the way you send personal data to the EU, EEA, Gibraltar and other countries deemed adequate by the EU.

What you need to do if you currently hold data on individuals outside the UK

Organisations may want to consider, where possible, taking stock of the personal data they hold so they can identify and track relevant legacy personal data to which EU data law applies in line with the Withdrawal Agreement requirements.

Will the UK continue to use GDPR at the end of the Brexit transition period?

After the end of the transition period, GDPR will be retained in UK law and will continue to be read alongside the Data Protection Act 2018, with technical amendments to ensure it can function in UK law.

For support and advice on related issues, please get in touch with our expert Brexit transition team today.

If your business moves goods into Northern Ireland, you need to take two steps urgently to avoid disruption in 2021

With the Brexit transition period ending on 31 December 2020, a raft of new arrangements will come into effect on 1 January 2021, some of which will affect your business if you move goods into Northern Ireland from England, Scotland or Wales.

If you move goods into Northern Ireland, you should complete the following steps as soon as possible:

  1. Sign up for the Government’s free Trader Support Service

This free-to-use service is available to businesses of any size moving goods into Northern Ireland, providing guidance, training, a digital declaration support service and support from customs experts.

Sign-up here.

  1. Obtain an EORI number beginning with XI

If you already have an EORI number beginning with GB, you can automatically obtain an EORI number beginning with XI by signing up for the TSS before 23 November 2020.

If you do not have an EORI number, you must apply for an EORI number beginning with GB as soon as possible here. You will then be able to obtain an EORI number beginning with XI by signing up for the Trader Support Service by 23 November or by applying for one directly.

Please note that separate processes are expected to apply to food, agricultural, sanitary and phytosanitary goods will be subject to ‘specified processes’ that will be set out in due course.

Additionally, these measures apply to the movement of goods from Great Britain to Northern Ireland, but goods moving in the opposite direction are expected to continue as they do now.

You must complete these actions urgently to avoid disruption from January 2021.

Please contact us today for help and support with preparing your business for the end of the Brexit transition.