In this webinar, Kevin Hall, VAT Partner at Wright Hassall discusses VAT and the implications of Brexit.
Transcript
Please note this transcript has been auto-generated and may contain errors.
Hello, my name's Kevin Hall I’m the VAT partner at Wright Hassall and today I’d like to talk to you about VAT and Brexit and I’m going to try and do that in about five minutes. Let's give it a go.
The timing of the recording is critical at the moment with Brexit constantly changing and not changing and today we've just heard that the Brexit talks will continue and it's not expected to have that much impact on what I’m going to say the important thing with Brexit at the moment is to make sure that you understand your supply chains purchase and sales and that you are prepared as far as you can be in understanding where the difficult parts which might be affected are in that supply chain and you manage those risks and to the greatest extent you can.
So what areas do we have well, imports is a big area importing goods from the EU into the UK and indeed from outside the EU into the UK well isn't it simple do not just put the VAT import value into your VAT return as a liability and then recover it again in your VAT return what could be easier. In fact, it's slightly more complex than that and in fact becomes very confusing um for certain businesses of certain sizes operating in um slightly different ways at different times.
So not only do you need your number, not only will you need your import that statement which are administrative requirements, but you also have to identify whether you are a business importing from Europe, from the EU and perhaps ordering in bulk, but occasionally you'll need a small emergency item and that will be treated differently for importation.
For example, if you have an overseas seller, will they be charging you UK VAT? Will you be accounting for VAT under the reverse charge? Will you be the owner of the goods when they are imported into the UK? If you're not, that can cause real difficulties.
Are you perhaps a non-UK established business trying to import goods? You've then got to consider whether you're importing through an online marketplace, where previously you wouldn't have but whether you now have a UK VAT registration obligation. Whether you'll be charging UK that whether in fact you'll be lifted out of the VAT metals together on the import side, on the sales side, you will be and so on and so on.
Of course, businesses who import, once you've got your head around how your particular supply chain works you might think that would be the end of it.
Unfortunately, you might be doing things in a certain way, but on a regular basis things will change; you won't just be selling to individuals as an overseas seller occasionally you'll sell directly to businesses. You won't just be using online platforms, occasionally you'll be making that sale direct, maybe on occasions there will be delays of customs and you'll have impatient customers, so you decide to keep a stock in the UK all of these things might be occasional or small or slightly different to where you normally do things, but they all require different treatments and you'll need to continue to monitor those.
It's not just imports of course, exports as well again isn't that really simple are we not zero rating all our exports now to the EU regardless of who the customer is and what their status well yes that is the expectation, but again it's not the UK part of the supply chain which is going to be an issue for you. You're going to be looking at the place where the goods arrive in the EU and determining whether or not you've got an obligation to register for VAT in somewhere in the EU; pay that up to the local tax authorities there whether when the goods arrive which country are you going to declare the arrival of the goods in, are you going to keep a stock of goods in Europe to avoid delays or customs.
Many EU member states have a requirement to for the UK supplier to appoint a VAT representative, now that representative shares the responsibility for paying the VAT that's due to the local tax authorities. It's a requirement to have it in some of these countries which means you need to find someone who's going to do that; it's obviously a huge risk for them. I's quite expensive, they need to get insurance to cover themselves against that risk, so what you don't want is to be coming to about representative so late in the day that there are none left who can you can take you on.
Of course, you might be looking to choose a jurisdiction to import into which doesn't require about representatives; they're more administratively friendly less language barriers and so on and so on.
So, again the advice I’d be giving is to right at the start and as early as possible and begin today getting that supply chain analysed and reaching out to those that you need to reach.
Northern Ireland will be a unique fact jurisdiction. Northern Ireland is part of the UK as a single market Northern Ireland is part of the EU is a single market but it's not intended to be the case that goods can go from the UK through Northern Ireland to the EU without terrorists checks, without all sorts of costs and so on or vice versa from the EU into the into GB via Northern Ireland the intention there is that goods which are at risk of moving direct through Northern Ireland and between the EU and GB will be caught but it's not clear what those rules are going to be nor how they'll be implemented.
It's possible that there will be some planning opportunities here so it's worth keeping an eye on this but at the moment all we really know is that there will in essence be a kind of border in the Irish sea but not one that should be too obstructive, so there may well be some additional reporting requirements with goods going from GB into Northern Ireland.
There are some odd outcomes with VAT groups and things like that as well but if you're involved in Northern Ireland do get your head around what your supply chain is and where the risks are. It's all about goods isn't it, Brexit? Well that's not true either, services are in many cases not going to be affected if you supply advice from the UK into businesses in Europe. I don't expect that to change. However, if you supply services from the UK to an individual in Europe, you'll currently be charging UK, whereas after the 1st of January the expectation is that no VAT will be charged. You could even deregister, but you of course may wish to remain registered in order to recover VAT on your costs.
Financial services are currently exempt from VAT and if you supply them to a customer in the EU that means no VAT on sales great news. It also means you can't recover VAT on your costs whereas from the first of January, Rasheed Sunak chancellor has stated very clearly for financial services and I’d expect that includes insurance but he wasn't clear on that point. Those services which are supplied from the UK to the age of next year will be zero rated so still no VAT charged on sales which is still great, but it does mean you can recover the VAT on attributable costs so if you are, I mean many advisers don't have many costs so it's not worth worrying about or undergoing the administrative requirement to submit back returns to get back that's all that's about.
However, there is a fair sized market out there of for example fintech financial and technology services whose services obviously worldwide to members of the EU as well starting up a business like that has huge technological costs with VAT on it which until now very difficult to recover that for many simply impossible, but for next year it will be possible and start-up costs if you're buying in lots of advice lots of legal other professional services.
All of those things that this is this is good news for the financial service industry which is obviously such an important part of our economy because it will encourage new projects to begin it will encourage new startups as well.
So there's some good news there other services to operate your margin schemes how are you going to be affected for the holidays you arrange in Europe if you incur VAT on your costs in Europe if you're staying in hotels if you're paying for taxes in in France or Germany at the moment you would simply go to your home authority so HMRC in the UK and a claim back VAT through the online portal from those countries.
From next year will no longer be part of the EU of course so we'll no longer be entitled to take part in in that that mechanism. There is still a mechanism for non-EU parties such as a UK supplier however the timings are different so the period for which you can claim is different the deadlines by which you must submit a claim are different and in fact shorter and there will be a kind of transition period for when we're no longer in the EU when you can make claims for VAT paid while we were members of the EU.
It’s a bit of a complex area but you can get through it it's just the case if you've got VAT in Europe’s claim of getting a hedge around it and making sure that it happens and there's all sorts of other areas, these supply digital services, you can no longer be part of the many one-stop shop schemes, does that mean you have to register for that in all member states where you make supplies of digital services? Note there is a non-union scheme but it doesn't mean you have to register again for that
Can you use the margin scheme? What if you've got a yacht or an aircraft as a client and if they're owning a yacht in the Mediterranean and we're not part of the EU is that going to affect that paid status that can cause yachts to be impounded if the VAT is deemed not to have been paid? What about all the simplifications, so if you're selling goods to an individual currently in the UK you're selling to let's say Portugal or Hungary or something you can simply charge UK that if you're under the thresholds; you're not going to be able to do that next year; that's going to be an export from the UK which we've covered rated fantastic, but what about the supply that you're going to make inside the EU you're going to have to register for that. That's that's going to be lost triangulation if the goods are coming from Portugal too Hungary there's a simplification there which means you don't have to register for that in Hungary in the destination country that will be lost unless you're in Northern Ireland or you have an event registration and prison somewhere else in Europe call of stock if you're bringing goods in for a single customer just holding those goods in a certain country means you don't have to register for that there that simplification will go onward supply relief. Are you still going to be able to use it? Current thinking is probably you can and we're processing relief currently thinking is that you can use that as well as a relief still fulfilment houses if you're supplying goods and you're keeping those goods in a warehouse at the moment the warehouse is jointly liable with you potentially if you're not that registered as a an overseas seller a non-UK seller that of course will start to apply to all EU member state sellers as well the goods which are held in fulfilment where has it so called warehouses need to keep a track of what's going on.
Even things like the retail export scheme is being removed because I think it would just be too generous for people going to Europe to be able to do that come from Europe come to the UK buy that free goods and go back again and so that's being that there's a variety of changes which are known at this point and my message at the moment understand your supply chain understand what the risks are and get those risks managed and if it turns out that it's quite a complex scenario that and you need to reach out and make contacts with people in other European countries.
We can do that we can help you to do that and there is time to achieve that so by all means contact me Kevin Hall, my contact details are on the website and let me just check to see how I’ve done and I’m very sorry I’ve gone over but hopefully that was helpful and not everything will be helpful for everybody but hopefully something in there will have been helpful to you thank you very much for listening.
