Brexit – How can you prepare?
Will the United Kingdom leave the EU or stay? Or will there be another interim solution? The deal that Theresa May negotiated with the EU the last two years was shot down by the British Parliament on 15 January. Apparently the English themselves don’t know what they want. It reminds me of that song by Meat Loaf. “What’s it gonna be, boy? Yes or no?”. It seems that the No-deal scenario of 29 March 2019 will now be a lot more realistic than everyone thought so far. So you better be prepared.
VAT and customs
Should the United Kingdom leave the EU on 29 March (without transitional arrangements), this would have consequences in terms of the free movement of persons and goods and services, food safety, etc. and, of course, to a large extent in terms of VAT and customs.
Little is changing for services. In principle, B2B services are still considered to take place in the country where the recipient of the service is established. If you provide a B2B service to a company in the United Kingdom, you will not have to charge VAT. Not today and not after Brexit.
The most important changes, however, concern the supply of goods. What is today an intra-Community supply of goods from Belgium to the United Kingdom (EU country), will soon become an export to a non-EU country. You will then no longer have to submit an intra-Community declaration and you will have to include those export supplies in box 47 of your VAT return instead of box 46.
Conversely, a supply from the United Kingdom to Belgium is no longer treated here as an intra-Community acquisition, but as an import. The VAT on arrival remains due, but must in principle be paid to customs at the time of import. You no longer have to include your purchases of goods from suppliers in the United Kingdom in box 86 of your VAT return, or the corresponding VAT in box 55.
Please note, however, that every import and export is also accompanied by a customs document that must be sent electronically via the PLDA system of the Belgian customs authorities. Customs representatives or logistics service providers can take care of these formalities for you.
These are just a few examples of the changes that are coming our way.
What can you do now?
We advise you to take all the necessary actions now:
- Request of an EORI number
You need an EORI number to trade with countries outside the EU (so-called third countries). This number is based on the company number. According to statements by Minister De Croo, in the coming weeks the Customs and Excise Administration (AADA) will proactively assign an EORI number to approximately 20,000 companies and inform them individually about this.
If you don’t want to wait for this and already file the application yourself, you can find the application form and more information about EORI numbers here. The waiting time is limited. - Application for an ET 14000 permit
In principle, VAT is due on import when the goods are imported, but if you have an ET 14000 permit, the VAT is ‘postponed’ to the VAT return. This ‘postponed accounting’ means that you can declare and pay the VAT to be paid via the periodic VAT return instead of paying it to customs at the time of import. But in principle, you can also exercise your right to deduct at the same time. In practice, this means that you do not have to pre-finance import VAT.
It is also important to check (or have someone check) the consequences for your VAT return and your invoicing for all transactions you carry out with the United Kingdom.
Would you like to know more about the VAT and customs consequences of Brexit? Take a look at the website of the FPS Finance which – if we say so ourselves – does its best to inform the companies well (click here). For to-the-point advice, please contact our VAT specialists.
Making Tax Digital (MTD)
Finally, this. Throughout the Brexit story, the British government’s Making Tax Digital project has been pushed to the background. MTD is essentially the government’s plan to digitize the UK tax administration, and the first area where this will have an impact is VAT. Companies registered for VAT in the UK (above threshold GBP 85,000) will, in principle, have to do the following, starting from the first VAT period starting on or after 1 April 2019:
• Maintain the VAT data electronically;
• Submit the VAT returns to HMRC via ‘MTD-compatible software’.
The idea is that the data needed for the VAT returns are collected from the electronically held data and then sent digitally to the HMRC (i.e. without data being copied from one place to another). Many businesses therefore have to adapt their current accounting software to MTD-compatible software. If they use other software, they must use some kind of “bridging software” that extracts the information from the existing software and allows to submit it with HMRC.
This also applies to Belgian companies registered for VAT in the United Kingdom. There is said to be a six-month delay for businesses established abroad.
If you have any questions about this message, please do not hesitate to contact our VAT specialists.