In conjunction with MHA MacIntyre Hudson and Baker Tilly Netherlands, Baker Tilly US recently hosted a comprehensive webinar focused on the unique challenges and opportunities that many companies are facing as a result of Brexit.
It is clear that Brexit is going to impact companies doing business in the EU and the U.K. in many ways – from their day-to-day business, to their handling of value-added tax (VAT) and customs, to their tax implications. Below we have highlighted some of these impacts, and we welcome you to reach out to Baker Tilly’s specialty tax leader, Lynette Stolarzyk, to learn more and discuss ways that Baker Tilly can assist your company.
For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.
What is the impact of Brexit from a U.K. VAT and customs perspective?
Brexit is officially happening. The U.K. has left the European Union and finds itself in a transitional period through the end of the year. In the situation that the U.K. is being considered a non-EU country, from a VAT and customs perspective from Jan. 1, 2021:
- All supplies of goods to the EU from the U.K. will become third-country exports and be subject to customs declarations. The same applies for movements of goods from the EU to the U.K.
- Customs duty will be charged on U.K. goods imported into the EU, based on the tariffs determined by the EU.
- Customs duty will be charged on EU goods imported into the U.K., based on the tariffs determined by the U.K.
As a result, we are down to a matter of weeks for the U.K. and the EU to agree on a trade deal in time for 2021. Businesses in the U.K., throughout the EU and across the world are eagerly awaiting the trade deal specifics (including tariff details) in order to plan for the new rules and they anticipate incoming challenges beginning on Jan. 1, 2021.
Some of the key customs and U.K. customs and VAT changes that we know are going to happen include:
- The introduction of the UK Global Tariff: The U.K. will no longer be bound by the current EU Common External Tariff.
- The postponement of import VAT accounting: VAT will not be paid on the importation of most goods.
- The deferment of import declarations: This initiative applies only to “standard” goods and requires submission of customs declaration within six months.
- The changes surrounding e-commerce: With the abolishment of the Low Value Bulking of Imports (LVBI) on Jan. 1, the overseas seller or online marketplace will be required to charge VAT at the point of sale for any transactions under £135.
- The introduction of the Trader Support Service: This is a new online portal for declaring goods going into Northern Ireland from Great Britain.
The key issues here include the importance of incoterms, which determine who will be the importer and thus responsible for duty and VAT. U.S.-based businesses may already be familiar with incoterms, but the complicated rules will be new to many U.K. and EU businesses.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.
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