Tag Archives: VAT-cross-border

VAT: Post Brexit Import licences and certificates

By   5 November 2020
0

From 1 January 2021 businesses importing (including bringing in from the EU which were previously acquisitions) certain goods will require licences and certificates. Additionally, there will be new rules for bringing goods into the UK. As the UK will be a third country post Brexit (third country refers to any country outside the EU, and in this case outside its economic structures – the single market and the customs union).

Licences and certificates

A business will need to obtain a licence or certificate to import some types of goods (below) into the UK and it may also need to pay an inspection fee for some goods before they’re allowed into the UK.

The Goods

The goods, with links to details, are as follows;

Further GOV.UK information on importing goods from the EU to Great Britain from 1 January 2021 here.

VAT: Brexit latest

By   23 June 2020
0

The European Commission (EC) has published an updated Notice to Stakeholders which covers the UK leaving the EU.

The original document which was published in 2018 has been amended to reflect the latest developments which mainly include the official Brexit on 1 February 2020 and the current transition period, which, as matters stand, will end on 31 December 2020. Until that date, EU law in its entirety applies to the UK

The Notice includes:

  • The legal position from 1 January 2021
  • VAT rules for cross-border services
  • The VAT General Rule
  • MOSS
  • Refunds of VAT
  • Separation provisions of the Withdrawal Agreement
  • The supply of other services
  • Refund requests relating to VAT paid before the end of the transition period

The Notice states that; “…during the transition period, the EU and the UK will negotiate an agreement on a new partnership, providing notably for a free trade area. However, it is not certain whether such an agreement will be concluded and will enter into force at the end of the transition period”. I think that this is likely to be a charitable conclusion!

The EC advises businesses:

  • when they are established in the EU, to familiarise themselves with the rules applicable to services supplied to and received from third countries (which the UK will become from 1 January 2021)
  • when they are established in the UK, to examine whether new liability rules will apply to them with regard to their services supplied in the EU
  • to take the necessary steps in respect of services covered by MOSS
  • consider the changes in the VAT refund request procedures

The Notice does not cover the supply of goods nor digital services themself.

General

After the end of the transition period, the EU rules on VAT for services no longer apply to, and in, the UK. This has, particular consequences for the treatment of taxable transactions in services and VAT.

Businesses need to understand the probable changes and make preparations for a No-Deal Brexit.

VAT: Where do I belong?

By   7 May 2020
0

The place of belonging

The concept of “belonging” is very important in VAT as it determines where a supply takes place and thus the rate applicable and the country in which is due. (The so-called “Place Of Supply, or POS). It is necessary, for most supplies, to establish where both the supplier, and the recipient belongs. Because this is a complex area of VAT it is not difficult to be overpaying tax in one country, not paying tax where it is properly due, or missing the tax issue completely.

A relevant business person `belongs’ in the relevant country. A `relevant country’ means:

  • the country in which the person has a business establishment, or some other fixed establishment (if it has none in any other country);
  • if the person has a business establishment, or some other fixed establishment or establishments, in more than one country, the country of the relevant establishment (ie; the establishment most directly concerned with the supply); and
  • otherwise, the country of the person’s usual place of residence (in the case of a body corporate, where it is legally constituted)

A person who is not a relevant business person `belongs’ in the country of his usual place of residence. The `belonging’ definition applies equally to a supplier and the recipient of a supply, where relevant.

Business establishment is not defined in the legislation but is taken by HMRC to mean the principal place of business. It is usually the head office, headquarters or ‘seat’ from which the business is run. There can only be one such place and it may take the form of an office, showroom or factory.

Fixed establishment is also not defined in the legislation but is taken by HMRC to mean an establishment (other than the business establishment) which has both the technical and human resources necessary for providing and receiving services on a permanent basis. A business may therefore have several fixed establishments, including a branch of the business or an agency. A temporary presence of human and technical resources does not create a fixed establishment in the UK.

Usual place of residence. A body corporate has its usual place of residence where it is legally constituted. The usual place of residence of an individual is not defined in the legislation. HMRC interpret the phrase according to the ordinary usage of the words, ie; normally the country where the individual has set up home with his/her family and is in full-time employment. An individual is not resident in a country if only visiting as a tourist.

More than one establishment. Where the supplier/recipient has establishments in more than one country, the supplies made from/received at each establishment must be considered separately. For each supply of services, the establishment which is actually providing/receiving the services is normally the one most directly connected with the supply but all facts should be considered including

  • for suppliers, from which establishment the services are actually provided
  • for recipients; at which establishment the services are actually consumed, effectively used or enjoyed
  • which establishment appears on the contracts, correspondence and invoices
  • where directors or others who entered into the contract are permanently based, and
  • at which establishment decisions are taken and controls are exercised over the performance of the contract

However, where an establishment is actually providing/receiving the supply of services, it is normally that establishment which is most directly connected with the supply, even if the contractual position is different.

VAT groups

A VAT group is treated as a single entity. This also applies when applying the ‘place of belonging’. As a result, a group has establishments wherever any member of the group has establishments.

This is an area which often leads to uncertainty, and therefore VAT issues.  It is also an area where VAT planning may; save time, resources and avoid unexpected VAT costs, either in the UK or another country.

For more on our International Services







Budget 2020 – VAT implications

By   11 March 2020
0

A summary of how the 2020 budget changes VAT rules:

e-publications

Zero rating will apply to e-publications from 1 December 2020. This brings e-publications in line with traditional printed matter. The zero rate will apply to:

  • e-books
  • e-newspapers
  • e-magazines
  • academic e-journals

Presumably, this brings an end to HMRC’s arguments set out in the News Corp case.

Postponed Accounting

From 1 January 2021 postponed accounting will apply to all imports of goods, including those from the EU. This will provide an important boost to those VAT registered UK businesses which are integrated in international supply chains as they adapt to the UK’s position post Brexit.

Sanitary products

From 1 January 2021 the zero rate will apply to women’s sanitary products. This is calculated to save the average women £40 over her life.

Consultation

A consultation paper will be published to gather views on the potential approach to duty and tax-free goods policy post Brexit.

Cross-border goods policy

An informal consultation process will be launched in spring 2020 on the VAT and Excise treatment of goods crossing UK borders after Brexit.

Fund management

As announced on 4 March 2020 the government is legislating to clarify when fund management services are exempt from VAT.

Financial services

An industry working group will be set up to review how financial services are treated for VAT purposes. Presumably how Brexit will affect such services.

“Quick Fixes” Directive

Legislation will be introduced to simplify rules for the VAT treatment of intra-EU movements of call-off stock, allowing businesses to delay accounting for VAT until the goods are called-off.

Partial Exemption

Following the recent call for evidence on the simplification of the VAT rules on Partial Exemption and the Capital Goods Scheme, the government has said it will continue to engage with businesses in relation to their responses and will publish a response in due course.

Commentary

These proposed measures will be broadly be welcomed by business. Especially those in relation to e-publications and Postponed Accounting. It was widely expected that HMRC would lose its argument that e-publications and hard copy publications should be treated differently in any case. Postponed Accounting takes us back to the pre-1990s era. It looks very much like this means a “No-Deal” and although Postponed Accounting may be an easement for some aspects, it remains unnecessary if an agreement with the EU can be reached. However, there appears to be no political will nor appetite to reach such an agreement, so business suffers.







EC proposes new tools to combat cross-border VAT fraud

By   1 December 2017
0

The European Commission has, this week, unveiled new tools to make the EU’s Value Added Tax (VAT) system more fraud-proof and close loopholes which can lead to large-scale VAT fraud. The new rules aim to build trust between Member States so that they can exchange more information and boost cooperation between national tax authorities and law enforcement authorities to fight VAT fraud.

Commentary

One wonders if this is the type of thing that the UK will miss out on after Brexit. Will this increase the threat of fraud? Will fraudsters target the UK? Or will “taking control of our borders” mean that cross-border VAT fraud will be reduced?

We shall just have to wait and see…..







VAT – Intrastat; what is it? If you don’t know, you may be committing a criminal offence…

By   15 July 2015
0

Although often viewed as a necessary evil, Intrastat can be used by a business to obtain valuable information on markets in the EC. …Oh, and it may be quite useful to understand it to avoid getting a criminal record!  In this article I summarise the basics, provide useful links and look at the pros and cons of the regime.

So, what is Intrastat?

Intrastat is the name given to the system used for collecting statistics on the trade in goods between all 28 Member States of the EC. If certain conditions are met a business must, by law, submit monthly Intrastat Supplementary Declarations (SDs). Intrastat does not cover services, nor is it required for exports to recipients outside the EC.

The data collected under the Intrastat system forms a large part of overall UK trade statistics totals which in turn are an important part of the UK Balance of Payment account and an important indicator of the health of ‘UK plc’. This data is published at uktradeinfo and is used by a wide range of government and international organisations and is particularly useful in helping businesses gauge import penetration and establish new markets for their goods.

Intrastat responsibilities

If a VAT registered business trades with any of the other EC Member States, it will have a responsibility to report the trade to HMRC. How detailed that report is required to be depends on the value of its trade with other EC Member States for either purchases (arrivals) or sales (dispatches). If a business’ trade in goods falls below the Intrastat thresholds then EC Sales Lists may be required.

Reporting Thresholds for SDs

The limits are:

  • £1,500,000 for arrivals, and;
  • £250,000 for dispatches

In a calendar year.

Intrastat should not be confused with EC Sales Lists which are used to collect information on all sales from UK VAT registered businesses to business recipients in other EC Member States.  A guide to EC Sales Lists here

Classification of goods for Intrastat

Finding the right commodity code for goods is one of the most important aspects of Intrastat. An online classification tool, the Intrastat Classification Nomenclature (ICN) is available to assist businesses find the right commodity code for its goods. Here

The ICN is a fully searchable facility which can be used by everyone from beginner to expert.

Value for SDs

Only the value of goods are included in SDs (plus any related freight or insurance charges where they form part of the invoice or contract price of the goods).

The value does not include:

  • Commission, legal and financial services
  • Insurance, freight and/or carriage (unless it is included with the cost of the goods)
  • Labour
  • Goods bought and sold within the EU but which do not actually enter or leave the UK
  • Maintenance costs
  • Repairs

Submission of SDs

This may be done online or offline (which is preferred for large amounts of data).

Online submission details here

Offline submissions are via pre-prepared Excel spreadsheets available here

Via an email attachment – the file must be converted into the message format Electronic Data Interchange for Commerce and Transport (EDIFACT). Details here

Deadlines for submission of SDs

Intrastat declarations must be submitted on a monthly basis. Complete and accurate declarations must be received by the 21st day of the month following the reference period to which they relate.

Now, the scary part.

Penalties

It is perhaps surprising that if you fail to submit SDs by the due date, or send data that is inaccurate, a business will be committing a criminal offence (Statistics of Trade [C&E] Regulations 1992).

Penalties may be levied in cases where SDs are persistently late, missing, inaccurate or incomplete.

Although the penalty regime is a criminal one and could result in proceedings in a Magistrates Court, HMRC state that it normally prefers to “compound” alleged offences. This involves the offer of an administrative fine in lieu of Court proceedings. However, an administrative fine is only offered when, after receiving a Warning of Possible Criminal Proceedings letter, a business has brought its Intrastat declarations completely up to date. If any declarations remain outstanding Court proceedings will be instigated.

The plus side.

How to use Intrastat for your business

It is possible for a business to find out about; trade markets, competition, suppliers, customers and competitors using data collected via Intrastat.  Additionally, the information may be used to create a bespoke data table to suit a business’ specific needs. Information here

Intrastat pros and cons

Yes, businesses are being used as unpaid providers of trade information as well as unpaid collectors of tax.  It then does seem rather draconian that HMRC “coerce” businesses to provide information on pain of a criminal record. But the information is then there for a business trading within the EC to use for its commercial advantage.  It’s another chore on the VAT checklist I’m afraid.







VAT – The Future for the EC Digital Single Market

By   11 May 2015
0

VAT – The Future for the EC Digital Single Market

The EC has announced its plans for its VAT digital single market in respect of online sales. Full details are here and here.

The highlights are:

• Extension of MOSS to intra-EC and third country online B2C sales of goods.

• Introduction of a new EC-wide VAT threshold to help start-up businesses.

• Ending current distance selling thresholds.

• Allowing for domestic controls, including a single audit of cross-border sales.

• Removal of the VAT exemption for the import of small consignments form third countries.

• Removal of barriers to cross-border sales eg; geo-blocking and costs.

This is likely to have a huge impact on the way businesses deal with VAT on sales of goods to individuals overseas. If the introduction of MOSS is anything to go by, we may be in for a bumpy ride.