The European Commission has issued a new tool which enables businesses to check on the VAT rate for specific supplies. It is based on commodity codes but there are drop down menus for detailed descriptions. The tool covers both goods and services. There are both a simple and advanced search functions and the database also covers other taxes:
Claiming VAT in another country
If a UK business wishes to claim VAT incurred in a country outside the UK it will need a Certificate of Status (a “Certificate of Status of Taxable Person”). This certificate, known as a VAT66A, may be obtained from HMRC and certifies that an entity is in business (engaged in an economic activity).
Changes from 8 March 2021
HMRC has announced HMRC changes to the way it issues VAT66As to UK businesses. From 8 March 2021, HMRC will send the certificate by email. A small, but helpful nod to 21st Century technology. A business must first complete an informed consent form before HMRC will correspond by email. The VAT66A only lasts for 12 months, so it is prudent to set a reminder to renew.
However, and there is usually a however, some countries require a “wet stamped” document to support a claim, in which case, HMRC will continue to issue these by post. It makes sense to check what actual documentation each country in which a claim is made requires, as it does vary. It is usually also necessary to make a claim in the language of the country in which the VAT was incurred.
Who can request a certificate of status?
The authorised persons (director or secretary) of the businesses which is registered in the UK for VAT, or an agent which has a letter of authority from a UK VAT-registered business – form 64-8 to act on its behalf.
Requesting a certificate
Send an email to vat66@hmrc.gov.uk with “VAT certificate of status request” in the subject line and the following information:
Agent application
Write ‘VAT certificate of status – agent request’ in the subject line of the email, and provide the following information:
HMRC say that a certificate will be sent within 15 working days of an application.
Oh for the days of a single electronic application to HMRC which covered all 27 Member States…
VAT Basics
A quick look at Postponed Accounting (PA) and what it means for a business after Brexit
Pre-Brexit (if one remembers such halcyon days) acquisitions from other Member States crossed the UK border without any formalities as there was free movement of goods within all of the EU.
Now that GB is a third country, it is unable to take advantage of the benefits of a single market, so acquisitions become imports and are required to be declared when imported. However, gov.uk has announced he return of PA in an attempt to simplify matters.
PA
PA is accounting for import VAT on a VAT return means a business declares and recovers import VAT on the same return, rather than having to pay it upfront and recover it later. This means neutral cash flow; which is to be welcomed.
The normal rules about what VAT can be reclaimed as input tax will apply.
PA also has the advantage that imported goods are not delayed at the entry port while VAT paperwork and payment is completed. Of course, as experience has demonstrated; there may be other reasons for delays to imports and exports.
Who can use PA?
From 1 January 2021, if a business is registered for VAT in the UK, it will be able to account for import VAT on its return for goods it imports into:
There will be no changes to the treatment of VAT for the movement of goods between Northern Ireland and the EU.
A business does not need approval to account for import VAT on its returns.
How does PA work practically?
VAT is payable on imports of over £135 arriving into the GB from any country in the world, which now includes the EU. Practically, PA is similar to the current Reverse Charge. Output and input VAT is accounted for on the same VAT return.
When completing a customs declaration a business may choose how to account for VAT on its return.
If the Customs Handling of Import and Export Freight (CHIEF) system is used:
On the declaration, the following needs to be entered:
If the Customs Declaration Service is used:
The VAT registration is entered number at header level in data element 3/40.
Returns
Using someone to import goods on your behalf
If a business uses a third party to import goods on its behalf (eg; a freight forwarder, customs agent, or fast parcel operator) it will need to inform them how it wants to account for VAT on those imports, so that they can complete the customs declaration correctly.
Alternatives
The use of PA is optional. The alternative is to pay VAT on goods when they enter the UK. This means the use of the “usual” C79 certificates sent by HMRC on which input tax may be reclaimed (rather than any other documentation, eg; invoices).
Northern Ireland
Goods moved to NI from the EU are not impots (NI remains part of the EU, so the old rules on acquisitions still apply and no import VAT is due).
Customs Duty
Alongside additional border formalities, Customs Duties may be payable on certain goods. This Duty is not reclaimable like VAT. Most of the complexities of Customs Duty relate to the rules of origin.
Commentary
PA is a relief for businesses importing from the EU. It is a simple system and will be familiar to any business which applies Reverse Charges. With all the varying changes applying post-Brexit, this is one area which should not affect a business importing from the EU in terms of port delays or negative cash flow. To date, there is no evidence on how well the system is working, but anecdotally, I understand that this part of Brexit changes has not thrown up any issues, unlike other problems which have been widely reported. I stand to be corrected though.
Gov.uk has provided a new tool to check a business’ EORI number. (This used to be an EC resource now not available due to Brexit).
A guide to EORI here
A business may need to demonstrate to HMRC that it has carried out proper due diligence in certain cases.
Contact
If you have queries, or would like to obtain specific EORI advice, contact the HMRC EORI team using the online form
Access
Who has access to an EORI number?
The general public can access limited data, When a business is notified of its EORI number, it will be asked whether it objects to this data being published on the site.
HMRC has published two new sets of guidance for international post users and importing merchandise in baggage. The changes are mainly due to Brexit.
HMRC has published new guidance for international post users.
The notice explains what happens when a business imports or exports goods by post through Royal Mail or Parcelforce Worldwide.
The arrangements set out in the notice do not apply when a full declaration on a single administrative document (SAD – Form C88) is required.
The information about sending a package overseas has been updated. This relates to the new need to compete a customs declaration for goods sent to the EU.
The guidance covers commercial goods (also known as Merchandise in Baggage) which will be used, or sold by a business, where:
A person must declare all commercial goods. There is no duty-free allowance for goods brought into GB to sell or use in a business.
My guide to importing and exporting post Brexit here.
I been asked many times about the VAT position of UK residents buying goods online (and also by more traditional methods) so I thought a brief overview would be helpful.
It has been reported in the media that some overseas retailers have stopped selling to UK customers. This is a commercial decision and is not necessarily solely due to Brexit (although, clearly that hasn’t helped).
What has changed?
Pre Brexit, under the Distance Selling rules, VAT at the rate applicable in the seller’s country would be chargeable by overseas suppliers to UK recipients. This was in the same way as a domestic sale. There were then thresholds which, when breached, resulted in the seller registering in the customer’s country, but these were rarely exceeded by small or SME businesses. The Distance Selling rules still apply to EU Member States, but not the UK.
As the UK is now a ”third country” sales to the UK from the EU which were previously intra-community sales are now imports. From 1 January 2021, sellers of goods B2C (to UK individuals) with a value below £135 – so called low value consignments are required to VAT register in the UK – more details here. Clearly, many businesses are loath to do this hence their refusal to sell to UK customers. This change is not a result of Brexit but was a measure to level the playing field between EU and non-EU supplies (the latter often escaping the tax completely). From 1 July 2021 similar rules will apply to UK businesses selling to individuals in the EU, although there is likely to be a simplification measure; the so-called One Stop Shop (OSS).
Additionally, UK customers are usually responsible for the new post-Brexit import of goods, so there may be unexpected new VAT, duty and courier costs when buying certain goods from EU countries. This is similar to buying goods from any other country in the world.
It would appear that there will be a reduction in cross-border trade (in both directions) with the UK, and that is without factoring in shipping issues and delays at new borders.
TOMS is complex, time consuming, potentially costly and a major headache for tour operators. It does aim to simplify VAT accounting as it avoids businesses having to VAT register in every EU Member State in which it provides services.
But, are there changes ahead? The European Commission has published a Factual summary report which looks at TOMS. The consultation was to gather evidence in order to evaluate the scheme in terms of ;
Since Brexit, HMRC have stated that TOMS still applies in the UK, but supplies in the EU which were previously VATable were now zero rated. The result is that only supplies in the UK are subject to VAT on the margin achieved. The future is unclear however. There is no longer a level playing field between the UK and other EU countries as UK operators’ have an advantage. The potential outcomes(to my mind) are:
The rules of TOMS are not currently fully harmonised and there are variations in the way EU Member States treat non-EU travel companies (such as the UK now). There are also differences in the services which are, and are not, covered by TOMS. Watch this space…
As Brexit is all completely finished * * hollow laugh * * I look at what overseas businesses operating in the UK need to know in respect of compliance.
What is fiscal representation?
It is a safeguard for the authorities responsible for VAT in the EU (and UK). If it is not possible to collect tax from the taxable person, they can go to the representative who is usually jointly and severally responsible for the debt.
Each EU Member State has its own rules on representatives, but here I look at what overseas businesses need to do in the UK, and what the responsibilities are for a business acting in such a role. A representative must meet a set of tests to ensure that it is fit and proper in order for it to be allowed to act in a representative capacity.
In most cases, overseas businesses with no place of belonging in the UK register as a Non-Established Taxable Person (NETP).
Choices
If a business is a NETP, it will have a choice in how it registers and accounts for VAT in the UK (although in certain circumstances, HMRC have the power to direct a business appoint a tax representative).
Deal with UK VAT itself
In most cases an overseas business can deal with VAT without third party assistance. However, it must be able to:
Tax representative
A NETP may appoint a tax representative who:
A NETP is obliged to provide all of the information required to fulfil its obligations.
Tax Agent
A NETP may appoint a tax agent to act on its behalf. Such an arrangement will be subject to whatever contractual agreement the NETP and the agent decide. The significant difference to a tax representative is that HMRC cannot hold the agent responsible for any of the NETP’s VAT debts. This is clearly a better position for a UK business acting on behalf of a NETP. HMRC can decide not to deal with any particular agent appointed. Also, in some circumstances, if HMRC think it is necessary, it may still insist that a tax representative is appointed – this is usually in cases where there is a risk to the revenue. Additionally, HMRC can ask for a financial security.
As with the appointment of tax representatives a NETP:
It is possible to appoint an employee to act as a VAT agent.
Penalties
As is to be expected, get any of the above wrong and there are penalties!
The Government has launched a website for checking UK VAT numbers as EU VIES will no longer be available post Brexit.
This service can be used to check:
If you are a UK VAT-registered business, you can also use this service to prove when you have checked the validity of a UK VAT number.
New rules from 1 January 2021.
GOV.UK has published new guidance from the Department for International Trade.
The guidance sets out what a business will need to do 1 January 2021. It will be updated if anything changes.
It covers:
Exporting to and importing from the EU
Exporting to and importing from non-EU countries
All business with goods crossing the new border will need to understand and prepare for the changes.