VAT planning for Brexit

Preparing for a no-deal Brexit

HMRC have already provided guidance on certain steps that will help businesses prepare for a no-deal Brexit. These include making sure you have a UK EORI number (businesses already importing or exporting should already have one of these, but those who are only involved in intra-EC trade may not have). If you haven’t already got an EORI number, you’ll need one to ensure movements of goods into and out of the UK can continue uninterrupted post Brexit. In addition, if you’re going to continue to import goods in the EU post Brexit, you’ll need to apply for an EU EORI number as the UK number will no longer be valid for EU imports once we leave the EU. HMRC have recommended applying for an EORI number in the member state with which you do most business. You should be aware that HMRC have recommended businesses apply now. However, a number of member states have refused to issue an EORI as the business only requires one EU EORI and the UK number already satisfies that requirement (although certain member states have agreed to provisionally issue numbers, which will only have effect in the event of a no-deal Brexit).

HMRC have also suggested importers (and businesses that will be importers post Brexit) apply to use Simplified Transitional Procedures regarding imports and import taxes in the event of a no-deal Brexit. Businesses will also need to be aware that the EU member states may not introduce reciprocal simplified procedures, which may result in import VAT and duty needing to be paid before goods are released into free circulation, creating both a delay and cash flow impact on goods sent to the EU.

Both of the above steps are relatively straightforward, but they provide limited or no benefit if a Brexit deal is negotiated. However, the next steps are good practice regardless of the outcome of negotiations.

Preparing for Brexit with or without a deal

Understanding the supply chain and where goods originate from and how they reach your business is both good practice and crucial in understanding the potential impact of Brexit. We would recommend reviewing your supply chain to understand where goods originate, at what point they are brought in to the UK, the potential additional tariffs which would become due and where any potential shortages may arise.

Whilst we’re aware of a number of businesses stockpiling goods to mitigate the risk of shortages, this can tie up working capital at a time where businesses may need cash most. In addition, this may require additional warehousing and is unlikely to work for businesses trading in perishable goods.

We would advise any business directly involved in moving goods cross-border to review the commodity codes being used on declarations (either customs or intrastate declarations) to make sure the code being used is current and accurate. Thereafter, we would recommend businesses compare the commodity codes against HMRC’s list of post Brexit tariffs (with approximately 87% of tariffs set at 0% for a transitional period) and World Trade Organisation rates to understand the potential impact of additional, irrecoverable duty charges.

Any businesses who are moving goods within the EU, without the goods entering the UK, may be benefiting from simplified procedures such as triangulation or an intra-EU cross-border refund claim. If the UK leaves the EU without a deal, then simplifications such as triangulation may no longer work and EU VAT registration requirements may arise. Similarly, the process for EU businesses making cross-border refund claims is currently more straightforward than the process for non-EU businesses, which may result in changing deadlines and processes of which businesses will need to be aware.     

Finally, we would suggest reviewing agreements with EU customers/suppliers to understand who is responsible for the delivery of the goods. If your business is arranging collection or delivery, you’re likely to be the one who is responsible for the cost of additional declarations and taxes arising from the cross-border movement of goods.

Need help?

Our VAT team has worked with a wide range of businesses in preparing for Brexit and discussing their cross-border transactions. We’d be pleased to talk to you about any issues or concerns you may have. In addition, we have access to customs duty and VAT specialists throughout Europe and the rest of the world through our national network, MHA, and our international network, Baker Tilly International.

Call 0330 024 0888 or email [email protected]