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HMRC webinar and VAT: Getting ready for a no-deal Brexit

Neil Warren reviews key VAT matters raised by HMRC’s ‘Getting ready for a no-deal Brexit’ webinar, including the importance of EORI numbers.

10th Oct 2019
Independent VAT Consultant
Columnist
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Get ready for Brexit
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At the time of writing, it seems that we are on course for a no-deal Brexit. It was, therefore, good timing that HMRC recently delivered a one-hour webinar on relevant issues concerning the export and import of goods to or from EU countries after we leave. It was an excellent presentation which I recommend viewing via this link.

This is the first of a two-part series of articles on the webinar, the second of which will cover non-VAT tips given from the session.

EORI numbers

These are crucial. If a UK business either exports or imports goods, it will need a UK EORI number. In the past, these numbers have only been relevant to non-EU shipments but that will change with a no-deal Brexit. Here are three common issues raised by the webinar about EORI numbers:

  • It is important to understand the difference between a UK EORI number and an EU EORI number.
  • An EU EORI number will be needed if a UK business has, say, a branch in another EU country and imports stock into that country. The UK EORI number will no longer be good enough for this purpose after we leave the EU.
  • EORI numbers are only relevant to supplies of goods and are not needed for services.

An application for an EORI number takes only ten minutes online using this link (apparently) and will usually be issued within three working days.

Example

Mario owns an ice cream business and has branches in the UK and France. He is VAT registered in both countries, regularly transferring stock from the UK to France. Mario will need a UK EORI number to get the goods out of the UK and an EU EORI number to get the goods into France because he is acting as importer in France and exporter in the UK.

Important point: Mario’s EU EORI number will be valid in all 27 EU countries but the UK EORI number will only be relevant to getting goods into and out of the UK.

A common question I have been asked is whether Mario needs to form a separate legal entity after Brexit for his French trading activities. This is not necessary, because the same business can have a UK and EU EORI number depending on its circumstances.

Postponed accounting

I wrote an earlier article for AccountingWEB on the VAT issues of postponed accounting, expressing both my concerns at the risks to HMRC in terms of the tax yield but also the very important cash flow benefit to UK VAT registered businesses. This is because VAT will no longer be paid when the goods arrive in the UK (for both worldwide and EU imports), ie the VAT will be declared and claimed on the next VAT return instead.

Important point. For imports of goods by parcels and similar means, where the value is less than £135, the overseas seller is liable to pay the import VAT.

VAT number checking

It will still be possible to check the validity of a supplier or customer VAT number for an EU-based business using the EU’s Europa website but not UK numbers. They can be checked via a new service to be introduced on the gov.uk website.

EC Sales Lists will no longer be necessary and neither will Intrastat declarations.

Non-VAT registered businesses

A business that is not VAT registered must still get an EORI number if it is exporting or importing goods. But it will not benefit from the postponed accounting opportunity ie VAT is payable when the goods arrive in the UK.

Refund of VAT paid in other EU countries

If a UK business incurs VAT in other EU countries, then it can recover the VAT in most cases by submitting a refund claim via HMRC.

These claims must take into account the input tax blocks that apply in certain countries eg on travel and hotel costs.

After we leave the EU, any claims must be made directly to the country in question by using the non-EU refund system, commonly known as a ‘13th directive claim’.

Conclusion

The priority is to get EORI numbers in place as soon as possible!

Replies (4)

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By C.Y.Nical
11th Oct 2019 12:36

'For imports of goods by parcels and similar means, where the value is less than £135, the overseas seller is liable to pay the import VAT.'
When I first heard this idea I said it was mad. Are they really going to try this? I can imagine the response they will get from my Australian supplier of model railway parts if he is asked to register with HMRC and pay UK VAT on his supplies. He will either ignore them or he will stop selling to the UK. The same applies to my USA suppliers of low value items for the American equipment on our boat. I bet they will never succeed in even finding the Chinese one-man-bands who sell low-priced electrical parts into the UK market by post, and even if they do find them they won't be able to extract any money from them.

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Replying to C.Y.Nical:
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By nutwood
11th Oct 2019 14:25

Details of the scheme are set out in Notice 143. At present it only applies to traders in the Channel Islands, Hong Kong, Singapore and New Zealand and who are duly authorised by their national authorities to use the scheme so your Australian and US suppliers couldn't use it even if they wanted to. It only applies to packages consigned via Royal Mail or Parcelforce.

If it's proposed that the scheme is extended to the EU after Brexit then all I can say is that I haven't come across it in in the tens of thousands of words I've had the misfortune to have to read of the many millions of words available on line of HMRC's Brexit advice.

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By nutwood
11th Oct 2019 14:43

Anything to do with Brexit preparation is addling my brain so I was befuddled by the references to UK EORI numbers until I remembered that numbers issued by HMRC actually carry a GB prefix.

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By Carolynne
14th Oct 2019 15:54

There is an article on HMRCs website stating that …..

Vat Registered businesses are to be automatically allocated a GB EORI number (See Link)

https://www.gov.uk/government/news/chancellor-accelerates-brexit-prepara...

I had a client based in the UK enquire if he was covered and when I looked at the verification page (See Link)

https://ec.europa.eu/taxation_customs/dds2/eos/eori_validation.jsp?Lang=en

I put 'GB' followed by the clients 'Vat number' and three zeros '000', it came up with 'This EORI number is Valid.'

So although it is definitely worth while checking on the GB verifier, this article has not mentioned that HMRC have automatically registered every Vat registered customer who have not already done so, for a GB EORI number.

(Although the article does state non-vat registered customers will still have to have one).

So as far as I can see, unless you have a company importing and exporting from somewhere else in Europe other than Great Britain, where they would need an EU EORI number, there is no need to panic.

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