News: 17 September 2019: The UK Government has recently released a number of important pieces of guidance relating to Brexit.
Post Brexit EU VAT reclaims
One of the further consequences of Brexit will be that, from 31 October, UK businesses will no longer be able to submit VAT reclaims for expenditure incurred in the EU via HMRC’s online platform. UK VAT registered businesses who paid VAT in the EU on expenses relating to conferences, trade fairs and employee subsistence in the EU have been able to submit reclaim via HMRC’s portal to the tax authority of the country where the expenditure was incurred.
After Brexit, UK VAT registered businesses may still make reclaims, however these will need to be submitted directly with the EU country in question. A lot will depend on the reciprocity agreements the UK will have with EU countries after Brexit and the format of the claim will depend on the country itself.
If you have any specific questions regarding this please contact our VAT team.
It is a myth that all UK businesses importing or exporting goods from the UK will need an Economic Operator Registration and Identification (EORI) number from the UK and an EORI number from the EU after 31 October. Read more about EORI myths here.
Customs tariffs are of great importance to businesses bringing in goods to the UK as they will have an impact on the final cost of purchasing goods.
A Customs tariff is applied to the Customs value of goods on entry to the UK (currently from outside the EU) and then Import VAT is applied to this final value. Currently, no Customs tariffs are applied to goods being acquired from the EU.
The Government has published a customs tariff for the UK to use in the event of a no deal Brexit. Given the time scales, the tariffs that have been announced are a temporary measure with duty rates on a large number of products being at 0%.
The UK currently uses the European Union common tariff which will become redundant once the UK leaves the EU.
The new UK tariff lists the customs duties that will apply to each type of good entering the UK after 31 October if there is no deal. It should be borne in mind that this will apply to all imports to the UK so this will cover goods coming in from the rest of the world and the EU.
In its guidance HMRC has provided information on countries which will be entitled to preferential rates of duty to those shown in the new tariff. This includes developing countries qualifying for the Generalised Scheme of Preferences (GSP), and there is also information on bilateral free trade agreements the UK has reached with some countries, including Switzerland, Chile and Israel.
As mentioned above, the tariff is a temporary measure in the event of a no deal Brexit and it is expected that a more detailed tariff will be developed in the 12 months following Brexit.
Although approximately 87% of goods will be subject to a 0% rate, some products will be subject to a duty rate. This is mainly in the automotive and food sector and the tariffs mirror existing EU rates. For example, motor cars will still be subject to a 10% rate of duty.
This development is another issue that businesses should be considering if the UK leaves the EU on 31 October. As previously advised we recommend that businesses apply for an EORI number (Economic Operator Registration and Identification) which is a requirement on Customs documentation and other procedures such as inward processing relief and warehousing.
Businesses also have the option to use transitional simplified procedures (TSP) to declare their goods to Customs. This will allow importers to defer making a full declaration and paying customs duty until after the goods arrive in the UK. Applications to register for the TSP scheme can be submitted online. Applicants must hold an EORI number and apply to defer payment of import duties.
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