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How will Brexit impact how I operate in my small company?

If you work only in the UK for UK customers, then there are no significant business Brexit implications that could affect your working arrangements.

If you work only in the UK for UK customers, then there are no significant business Brexit implications that could affect your working arrangements.  However, if there is a business need to travel to the EU, e.g. activities such as travelling for meetings and conferences (after 1st January 2021), then you may require a visa or work permit to do so.

You should also ensure that you meet the professional requirements for the country you are going to. Please note, some advice may change closer to the 1st January 2021 deadline, in the event of  any further developments.

When will Brexit rules affect my company?

The changes take place from 1st January 2021.

What areas of Brexit do I need to be aware of?

Key areas are:

  • Brexit and International trade
  • If you are travelling to the EU on behalf of your business
  • If you are taking on employees who  come from the EU
  • Impacts on certain business sectors

Brexit and International Trade

What if I am providing my company services to the EU after 1st January 2021?

The government has stated that, post Brexit, the main VAT ‘place of supply’ rules will remain broadly the same.

It is important to distinguish between business customers and customers not in business.

HMRC refer to these as B2B supplies and B2C supplies.

In the vast majority of cases, your company will be trading with other companies in business -B2B.

So the general rule is where a UK business supplies any service to a  business customer outside the UK no UK VAT is chargeable.

Such a service is outside the scope of UK VAT altogether (however, there are certain excluded services which are the exception to this rule).

To evidence the fact that services relate to customers based in the EU, no evidence is required other than the EU companies VAT number.

The customers VAT number should be quoted on the sales invoice- you may still have to disclose the reverse charge narrative on your invoice, but currently this is unclear.

However, businesses should be aware that they may continue to create VAT liabilities in other EU member states and it may mean that businesses have to obtain multiple EU VAT registrations for each country.

Do I still need to complete an EC sales list from 1st January 2021?

HMRC have advised that no EC sales lists are required to be submitted for  periods commencing after this date.

What if I am providing my business services to customers outside the EU?

Such a service is outside the scope of UK VAT altogether, (so VAT isn’t charged)  however, you do need to demonstrate that your customer is in business. Very often, this self-evident from the identity of the customer and the nature of the service, however, you should keep commercial documentation.

What if I am acquiring business services from suppliers in the EU?

When receiving services, it is expected that UK businesses will still have to apply a reverse charge to the receipt of services from non-UK suppliers. This would ensure that there is no competitive advantage from sourcing services via non-UK suppliers.

What if you are receiving/importing  goods from the EU?

Most new regulations surround the importation of goods from the EU.

HMRC do advise that you consider the following actions before the deadline otherwise you will not be able to take possession of your goods:

Apply for a GB EORI number
To import or export goods into the UK you will need an GB Economic Operator Registration and Identification (EORI) number. This is required for all businesses (traders and hauliers) moving goods into or out of GB, including those delaying their import declarations. If you don’t have an GB EORI number, you will not be able to import and export goods into the UK.  Last year, HMRC auto enrolled VAT registered businesses with EU trade which did not have an EORI number, so you should check whether you already have a number before applying because you won’t be given a new EORI number.

Get a Customs Intermediary
Customs declarations are complicated. Most businesses that currently trade outside the EU use an intermediary, such as customs agents, Fast Parcel Operators (FPOs), Freight Forwarders (FFs) or brokers, to help them meet the customs requirements. Intermediaries can help traders find the information needed to complete formalities and submit the required declarations into HMRC’s customs systems, including for example information such as the value and origin of goods. Using an intermediary simplifies the declaration processes for traders. The UK Government has announced a grant scheme to support intermediaries and those traders who want to make declarations themselves.

Apply for a Duty Deferment Account
The basic rules of customs are that imported goods need to be declared, and any duties paid (which could include VAT, customs and excise duties), at the time of importation.  However, traders who import goods regularly may benefit from having a “duty deferment account” (DDA). This enables customs charges including customs duty, excise duty, and import VAT to be paid once a month through Direct Debit instead of being paid on individual consignments.

With effect from 1 January 2021, VAT registered traders can account for import VAT on their VAT return using postponed VAT accounting. To set up a DDA, traders, or their representatives, apply for a deferment account number (DAN) and will need to be authorised by HMRC. New rules are being introduced which will allow most traders to use duty deferment without a Customs Comprehensive Guarantee (CCG).

Prepare to Pay or Account for VAT on Imported Goods
From 1 January 2021, if you are VAT registered and completing full customs declarations and have chosen not to defer your customs declaration, you can choose to adopt postponed VAT accounting to account for import VAT via the VAT return.

With regards to VAT on imports of goods in consignments not exceeding £135 (excluding Excise and consumer to consumer consignments), the point at which VAT is collected will be moved from the point of importation to the point of sale. This will mean that UK VAT, rather than import VAT, will be due on these consignments and therefore accounted for via the VAT return. 

Northern Ireland
Although the UK will become a separate customs territory, there are special rules in relation to goods imported and exported from and to Northern Ireland.

What if you are exporting goods to the EU?

Post 1st January 2021, UK businesses exporting to EU countries will need to follow VAT processes they currently use when  trading with  non-EU countries. In this respect, businesses will continue to be able to zero-rate sales of goods to EU businesses. Businesses will need to retain evidence to prove that goods have left the UK, to support the zero-rating of the supply.  

If you are travelling to the EU on behalf of your business

If you intend to travel to the EU on behalf of work , then you may require a visa or work permit to do so. You should also ensure that you meet the  professional requirements for the country you are going to.  Business travel includes activities such as travelling for meetings and conferences, providing services (even with a charity), and touring art or music. 

If you are taking on employees who come from the EU

EU, EEA or Swiss citizens and their family members who are living in the UK before 1 January 2021 need to apply to the EU Settlement Scheme to continue living in the UK after 30 June 2021. Any UK-based employees who are citizens of the EU, the European Economic Area (EEA) or Switzerland, must register for settled status to continue living and working in the UK six months after the end of the transition period on June 31 2021. A new points-based system for sponsored workers will be coming into effect from January 1 2021. This will cover EU and non-EU migrants alike.

Impacts on certain business sectors

If you are in the Construction industry, the impact could be significant, both in terms of using workers from the EU and readily accessing EU building supplies. There are also further changes in the pipeline for CIS registered and VAT registered businesses from 1st  March 2021  in respect of the VAT Domestic Reverse Charge.   

Updated on 24th December 2020

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