This section covers the following key areas. Click on a heading below to navigate to that area, you can return to the main menu at any time.

VAT and Indirect Taxes

Although the UK has formally left the EU, for VAT and Customs purposes it continues to operate under the existing EU rules until 31 December 2020. After that, however, the UK becomes a “Third Country” for EU trade purposes and a number of things change. The main impacts are on the movement of goods, but some services are also affected.

How to claim VAT refunds from EU member states from 1 January 2021

You can continue to use the current EU VAT refund system to claim a VAT refund on expenses incurred before 1 January 2021 in EU member states, until 11pm on 31 March 2021. This allows you to claim a refund through the HMRC portal. However, for expenses incurred on or after 1 January 2021, the HMRC portal will be replaced by a country-by-country approach which will inevitably be more complicated. Claims by EU businesses to the UK will follow the existing Third Country procedure. There’s more information in this detailed guidance note on the Government’s website here. This is an area our VAT team can help you manage, when you get to this stage.

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Importing and Exporting Goods

From 1 January 2021, movements of goods to and from the EU into the UK will require formal export and import declarations at both the port of exit and the port of entry. These procedures are essentially identical to those which currently exist between the UK and non-EU countries. Businesses will need to familiarise themselves with the requirements and be able to either make the required declarations themselves or appoint an agent to act on their behalf. Agents are already very busy and the earlier action is taken, the better. Failure to do this could prevent goods being moved. Helpfully, the Government has created a handy page on their website for finding a a freight operator. 

Exports of goods will remain VAT zero-rated, and exporters will still need to hold commercial evidence of export to support this. In addition, an export declaration must also be held. It will no longer be necessary to quote EU customer VAT numbers on invoices and intrastate and EC Sales Listings will not be completed.

When goods are imported a duty and VAT liability will be created, which must be settled before the goods are entered into either the UK or the EU. Again, a business can either make the import declaration and pay any VAT and duty themselves, or appoint an agent to do so. The VAT rate payable at import will be the same as on domestic transactions in the country of import and is normally recoverable subject to the usual rules on business use. Import documentation is required to support recovery.

Rates of duty vary depending on the product and also on the form of any agreement the UK reaches with the EU. If no deal is reached, the UK will trade on World Trade Organisation (WTO) terms. Additional duty costs need to be priced in to supply chain costings.

There are various mechanisms available for payment of import VAT and duty – these vary across Member States, so need to be considered on a country by country basis. The UK has introduced Postponed Import VAT accounting from 1 January 2020, which effectively allows businesses to pay and recover import VAT via VAT returns, eliminating any cashflow cost. Duty must be paid prior to entry, although the UK does have a deferral mechanism – this must be applied for. Agents will often pay import VAT and duty due, but at a cost.

Apply for HMRC grants to help your business with customs declarations

Completing custom declarations is a complex, specialist area. HMRC has provided a list of agents that can help with this area on their website, but they’re also offering funding to businesses to help towards the cost of recruiting or training an in-house specialist and developing the required IT infrastructure to submit Customs declarations. We've covered more detail about these grants, who is eligible, what it can be used for and how to apply in our blog here.

HMRC has set aside £85 million in funding for businesses across the UK but applications are coming in thick and fast. We advise you apply without delay if this is an area you need assistance with. The scheme is open until June 2021, on a first come, first served basis. Payment time once application is approved is around a month.

UK EORI number

Any business moving goods into or out of the EU MUST have a UK EORI number – this is easy to apply for via HMRC’s website and takes about a week to arrive.

UK businesses intending to act as importers into the EU may need to appoint a local fiscal representative to handle Customs obligations. A Fiscal Rep may also be required for VAT registrations in some EU states for non-resident businesses.

Some special VAT regimes – notably the distance selling scheme – will disappear for UK sellers after 31 December and businesses currently using this should review the revised requirements as soon as possible.

You may need an NI EORI number - skip ahead to our section on Northern Ireland to read more.

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In broad terms, the end of the transition period will have a smaller impact on the sale and purchase of services between the UK and the EU. The basic VAT rules governing when and where VAT should be charged won’t change, although there will be no requirement to quote customer VAT numbers on invoices and EC Sales Lists will disappear.

Some special regimes will change. In particular, UK users of the MOSS (Mini One Stop Shop) regime (broadly, suppliers of electronic services to consumers) will have to register for VAT in a member state. It is also likely that MOSS will be extended to a range of other B2C supplies in mid-2021 and affected businesses should watch the position carefully.

The reverse charge on “imported” services will continue to operate as now.

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Northern Ireland

Special Customs and regulatory rules will apply in Northern Ireland from 1 January 2021. These are set out in the Northern Ireland Protocol. To avoid the need for Customs checks and import and export declarations for goods moving between NI and the Republic, NI will, in effect, remain part of the EU for Customs and regulatory purposes. The flip side of this, of course, is that goods moving between NI and the rest of the UK will be subject to some level of Customs control to ensure that Customs duties are paid and EU product standards are met. 

The precise level of these checks is still to be determined and may vary subject to the final form of any UK-EU trade deal. There may also be special rules to ensure Customs duties are collected and paid on goods in NI which are deemed “at risk” of moving across the land border into the Republic. 

HMRC issued new guidance on 26 October on the VAT treatment of the supply of goods between the UK and Northern Ireland. The main points to be aware of are: 

  • Northern Ireland remains aligned to EU rules for Customs and VAT purposes but will operate within the UK VAT system 
  • No separate Northern Ireland VAT registrations or returns – all VAT will be reported through UK returns 
  • UK VAT still charged on sales between UK and Northern Ireland 
  • VAT will be due on transfer of own goods to Northern Ireland - this is a change to the current rules. 
  • VAT groups still possible between UK and Northern Ireland, but VAT will be due on intra-group transfers in some circumstances – this is another change to the current rules. 
  • There are some changes to Margin Schemes 
  • Additional guidance has been issued for goods liable to excise duty  
  • No changes to sales on ferries 

You can read the full guidance on HMRC’s website here.

Do I need an NI EORI number for trading with Northern Ireland?

A business with a GB EORI number may also need a NI EORI (prefixed "XI") if they move goods between Northern Ireland and non-EU countries, including from the rest of the UK into NI. If a business holds a GB EORI number and HMRC thinks they also need a NI one, it should be sent automatically by mid-December. Alternatively, the business can apply for an NI one through the Trade Support Service page on the Government’s website here.

Use of the Trade Support Service isn’t compulsory, but it is highly recommended -  essentially, it’s the UK Government’s support site for businesses trading with or within Northern Ireland. Registration is straightforward and it provides a lot of helpful information. The site can also be used to make the new digital declarations for goods moving from the rest of the UK to NI.

If you use third party carriers to move goods to Northern Ireland, you can expect them to ask for your “XI” EORI number before 1 January to allow them to make digital declarations on your behalf.

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HMRC Handy resources

HMRC’s guidance below is well worth reading for more information:

Finding freight forwarding companies, fast parcel operators and other specialists:

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