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Brace for Brexit 22: Top ten VAT tips


In this final Brexit article, Neil Warren provides his top ten VAT tips to help businesses prepare for the end of the EU transition period on 31 December 2020.

22nd Dec 2020
Independent VAT Consultant
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We have all been through a massive learning curve in the last few months. We are now fast approaching the end of the transition period on 31 December 2020, which was supposed to ease the disruption following the UK’s exit from the EU.

Many issues will be very different from 1 January 2021 – so here are my top tips to consider.

  1. Use VAT postponed accounting

Remember that a VAT registered business in GB can request postponed VAT accounting for worldwide imports of goods, not just for those coming from the EU. Using this system, VAT is not payable at the time the goods arrive, but is accounted for as a reverse charge entry on the next VAT return. This helps enormously with the business’ cash flow.

  1. Don’t forget that all exports will be zero-rated

Any goods that leave GB for another country will be zero-rated for VAT purposes. They will be subject to duty and VAT when they arrive in the other country. Don’t forget that proof of export must be retained to support the zero-rating (see VAT Notice 703, sections 6 and 7).

  1. Consider using a freight forwarder

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Replies (2)

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By nksimmons
24th Dec 2020 13:14

The guidance for new customs rules and VAT accounting seem a little bit like the rules for golf - you think you have understood, but then, no I didn't get that bit about not looking for the ball for not more than 5 minutes.

I honestly have no idea how to navigate all these new rules that seem to be changing by the day (I'm keeping everything crossed for a 'deal' so at least the payment of duty will go away on anything from the EU). Should I be opening a deferment account anyway? How will the Postponed VAT accounting work in practice? How do both duty and VAT relate to the much encouraged 'use a freight forwarder or customs clearance specialist'? I had a call with a very well known accountancy firm a few days ago who are offering to complete customs declarations and it sounded very much like they haven't got a clue how it will all work and haven't even got all their own house in order (and won't until later in Q1). Can anyone point me to a clear explanation (as opposed to links the the HMRC 'guidance' which just sends you round and round in circles?
We are a very small company that imports a lot from the EU (and a little bit from RoW). At present when something from RoW arrives in the UK we get a call from DHL/UPS/FedEx saying we have your goods and if you want them you need to pay us the VAT and duty plus £11-15 for the privilege of using our deferment account. On the face of it the new world sounds fine as at least the VAT on RoW imports won't need paying immediately and although there's more paperwork it won't make a difference to VAT on EU imports (if I can figure out how everything interacts). As for duty perhaps the deal will come through and that should be a non-issue on EU imports? So just duty still to pay on RoW as there always was. I assume we need to tell whichever freight company is physically importing the goods to put down our VAT / EORI number and if the goods are from the EU that's that? Not sure why we now have to pay £45 as opposed to the £11-15 we paid previously.
Then there's all the stuff about simplified declarations and CHIEF and goodness knows what else - and that we can or is that must if X, Y and Z....
Anyway if anyone is less confused or can point to really clear (non-HMRC) guidance I'd be very grateful!

Thanks (6)
Replying to nksimmons:
By M3lissa
09th Apr 2021 17:26

I feel your pain.

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