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NO DEAL BREXIT – WHAT ABOUT VAT?

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NO DEAL BREXIT, CUSTOMS AND VAT

The Government and HMRC have updated its collection of high-level guides called “partnership packs”. These will help import/export prepare for changes to customs procedures if there’s a “no deal” scenario.

If we exit without a deal, UK businesses will have to apply customs, excise and VAT procedures to goods traded with the EU. This is in broadly the same way that already applies for goods traded outside of the EU.

In the event of a “no deal” Brexit, the government’s aim will be to keep VAT procedures as close as possible to what they are now. This will provide continuity and certainty for businesses. However, there will be some specific changes to the VAT rules and procedures that apply to transactions between the UK and EU countries.

Postponed Import VAT Accounting

A “no deal” Brexit, will lead to postponed accounting for import VAT on goods brought into the UK will be introduced. UK VAT registered businesses importing goods to the UK will account for import VAT on their VAT return. This is opposed to paying import VAT at or soon after the time that the goods arrive at the UK border. This procedure will apply both to imports from the EU and non-EU countries.

Low Value Consignments

‘No-deal’ also means VAT will be payable on goods entering the UK as parcels sent by overseas businesses. Low Value Consignment Relief (LVCR) will no longer apply to any parcels arriving in the UK. For parcels valued up to £135, a technology-based solution will allow VAT to be collected from the overseas business.

VAT Mini One Stop Shop (VAT MOSS) will come to an to end

A further change if the UK leaves the EU without an agreement is that the UK will stop being part of EU-wide VAT IT systems. This includes the VAT Mini One Stop Shop which currently simplifies VAT reporting for UK businesses.

Customs Changes

Businesses can currently move goods freely between EU countries. For customs purposes, this means that businesses trading with the rest of EU do not have to make any customs import or export declarations. Their trade with the EU is not subject to import duty.

In the event of a “no deal” Brexit there would be immediate changes to the procedures that apply to businesses trading with the EU. It would mean that the free circulation and movements of goods between the UK and EU would end.

HMRC is currently introducing its new Customs Declaration Service (CDS), which replaces its Customs Handling of Import and Export Freight (CHIEF) system.

Customs and excise rules would change from 11pm on 29 March 2019 for businesses trading with the EU.  Impacts would include having to apply the same rules to goods as those on goods moving between the UK and non-EU countries.

This means customs declarations would be needed when goods enter the UK, or when they leave the UK. (Import/export declaration).

For imports into the UK, a separate safety and security declaration needs to be made by the goods carrier. This is usually the haulier, airline, freight train operator or shipping line.

For exports from the UK, the export declaration includes the safety and security declaration.

 

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