Shaw Gibbs VAT Manager recently joined forces with German DFK member firm BSKP to deliver a seminar to help clients plan for Brexit.
The Brexit seminar was delivered by Thomas Lechera from the BSKP who provide: tax, and accountancy services from their 11 offices throughout Germany.
Both BSKP and Shaw Gibbs are members of DFK, an international association, a worldwide association of independent accounting, tax and business advisory firms who have been advising clients with interests in more than one country for more than 45 years.
A summary of the seminar is below…
Supply of services within the UK
In regard to business-to-business (B2B) supplies of services between UK and EU companies there is no change to the place of supply rules including reverse charges. Businesses should account for VAT on such supplies as current.
In relation to business-to-consumer (B2C) supplies, generally the VAT is due in the country where the supplier is located, however, there are many exceptions to the general rule relating to cultural, artistic, sporting, scientific, educational or entertainment services whereby the VAT is due where these services have been performed.
Supply of goods within the UK
For Business-to-Business (B2B) supplies, it is usually the customer who takes care of the VAT reporting obligations on import. Businesses in this situation should clarify such arrangements with your UK customer as to avoid any potential VAT issues arising post 31st December 2020.
B2C distance sales post 1st January 2021 – where goods are located outside the UK
From 1 January 2021, the VAT treatment of sales of goods by non-UK established sellers (i.e. sellers established abroad for example, in the EU etc) will be treated as follows:
- Direct sales to UK consumers (B2C sales consignment less than GBP135), non-UK established sellers must now charge UK VAT on such UK sales at the point of sale and have ongoing VAT compliance obligations (VAT invoicing, VAT returns, VAT payments) so immediate VAT registration is required.
Sales by non-UK established sellers made via Online Market Places (OMP’s) – where the goods are located within the UK
The non-UK established seller will be deemed to have made a B2B zero-rated supply to an OMP, so the non-UK entity has no need to VAT register within the UK as the OMP will ultimately be responsible for accounting for the UK VAT on the supply. However, where the non-UK established seller has incurred VATable UK costs you may voluntarily VAT register to recover them including import VAT.
Sales to UK business customers via an OMP (B2B via OMP consignment of any value)
The overseas seller is liable to account for VAT and issue a VAT invoice where the UK customer provides their VAT number. If the VAT registration number of the UK business customer is not available, the sale will then be treated as a B2C via OMP supply (please see above).
Sales made via OMPs (goods outside the UK at the time of sale)
Sales to UK consumers via an OMP (B2C via OMP consignment less than GBP135)
In this instance, a seller will be deemed to have made a B2B supply to the OMP which would be classed as ‘outside the scope of UK VAT’. The result would be that there will not be any UK VAT accounting obligations for the non-UK seller within the UK.
Sales to UK business customer via an OMP (B2B via OMP consignment less than GBP135)
The seller is deemed to have made a B2B supply to the OMP which is outside the scope of UK VAT. The good news is that again there will not be any UK VAT accounting obligations for the seller. Where an OMP holds the VAT registration number of the business customer, there will be a deemed B2B zero-rated supply by the OMP to the business customer subject to ‘the reverse charge’. Further questions please do get in touch.
Following Brexit, all UK VAT registered businesses including non-established ones will be able to benefit from a new import VAT deferral procedure known as postponed accounting. This means that no UK import VAT is payable at the UK border and can be processed via the UK VAT return which greatly assists businesses with cash flow.
While it’s true that there are no tariffs on trade between the UK and EU, organisations should note that such free trade arrangements only apply where the goods originate in those locations i.e. within the UK or EU. Goods which originate from elsewhere may not fall within the parameters of the trade deal, which therefore means that organisations are potentially subject to positive rate of duties being applied upon importation of the goods into the UK.
EU VAT refunds
The simplified procedure for reclaiming VAT incurred by non-UK businesses within the UK will be removed. This will now result in greater administration as after 1 January 2021, EU established businesses will now need to follow the non-EU VAT refund procedures set out by the UK tax authority.
How can Shaw Gibbs help
Every business is different, and we welcome the opportunity to work with you to support your business with any UK VAT or accounting issues into 2021.
If you require more information on any of the issues contained in this letter, please contact us to discuss how we can help ease any business issues that you may be experiencing.