Navigating VAT Changes: A Guide for UK Businesses Post-Brexit
Published 27th October 2023
An overview of the impact of Brexit on VAT procedures for UK businesses, including changes in VAT rules, the need for VAT registration, and the implications for second-hand vehicle dealers in Northern Ireland.
Impact of Brexit on VAT Procedures
In the wake of Brexit, businesses in the UK have been compelled to reconsider imports and exports owing to the drastic changes in VAT procedures.
Specifically, companies importing or exporting to the EU have had to adjust their operations significantly. The use of EORI numbers, commodity codes, and the application of tariffs have all undergone changes, necessitating businesses to familiarise themselves with these new procedures.
The UK Global Tariff has also replaced the EU's Common External Tariff following Brexit. This has presented a shift in trade dynamics between the UK and EU countries. To alleviate some potential burdens of this transition, the UK government has provided a grace period for businesses importing from the EU, offering delayed customs declarations for up to six months.
This is one of the measures introduced to help businesses navigate the post-Brexit landscape more smoothly. Companies grappling with these changes can turn to Hammond Barr's expert accountancy services for comprehensive guidance and assistance adapting to the new VAT procedures.
Changes in Three-Party Deals and VAT Issues Post-Brexit
Brexit has also brought about consequential changes to three-party deals and VAT issues. Removing low import VAT relief has meant that all goods entering the UK as parcels sent by overseas businesses are now liable for VAT. This is a significant change that companies involved in international trade need to consider.
Moreover, VAT rules for supplying services between the UK and EU member states have been altered. The use and enjoyment rules, which apply to services provided from the UK that are effectively used and enjoyed outside the UK, now hold more relevance. Furthermore, the business-to-business (B2B) supply of services from the UK to the EU is now outside the scope of UK VAT.
Understanding these changes is crucial for businesses to remain compliant and avoid potential financial penalties. Hammond Barr's team of AAT-qualified technicians can provide valuable insights and support to businesses, helping them navigate these complex changes.
Impact of Brexit on VAT Procedures
Brexit has brought about a seismic shift in the Value Added Tax (VAT) procedures landscape for UK businesses, particularly those that import or export goods to the European Union (EU), with significant changes taking effect from 1 January 2021. An integral part of these changes is related to using EORI numbers, a unique ID code used to track and register customs information in the EU. Post-Brexit, UK businesses trading with the EU must now apply for a UK EORI number, a departure from the previous norm of using EU EORI numbers.
In addition to the changes in EORI numbers, there has been a transformation in utilising commodity codes. These codes, essential for classifying goods for customs declarations, have undergone alterations to align with Brexit stipulations. Applying tariffs, a form of import tax has also seen changes. The UK Global Tariff has now supplanted the EU's Common External Tariff, representing a significant modification in the trade relationship between the UK and the EU.
Another substantial change in VAT procedures is introducing a new rule allowing businesses importing from the EU to the UK to delay their customs declarations for up to six months. This measure, designed to ease the administrative load and reduce the impact on cash flow for businesses, is indicative of the steps taken by the UK government to mitigate some of the challenges presented by Brexit.
Despite these adjustments, companies are encouraged to seek professional assistance to navigate these complex changes and ensure compliance.
Changes in Three-Party Deals and VAT Issues Post-Brexit
The post-Brexit era has brought about a transformation in the way three-party deals and Value Added Tax (VAT) issues are handled. One of the critical changes comes in removing low import VAT relief. This change indicates that VAT is due on all goods, regardless of their value, entering the UK as parcels sent by overseas businesses. This is a departure from the previous regulations where certain low-value goods were exempt from VAT, thus highlighting the gravity of the change in the regulatory landscape.
Moreover, alterations have been made to the VAT rules concerning the supply of services between the UK and EU member states. For instance, the 'use and enjoyment' rules for services supplied from the UK to the EU have changed. These rules determine where a service is used and enjoyed and can affect where VAT is due. Furthermore, the supply of services from the UK to the EU in a business-to-business (B2B) context is now considered outside the scope of UK VAT.
This means that VAT is not charged on such services, marking a significant shift in the VAT procedures for UK businesses post-Brexit. These changes have far-reaching implications for companies involved in three-party deals and underline businesses' need to stay updated with the evolving VAT rules in the post-Brexit scenario.
VAT Registration and Cash-Flow Aspects
Post-Brexit, the landscape of VAT registration and the cash-flow aspects associated with it have undergone significant changes. One of the major amendments is the introduction of postponed accounting for import VAT on goods brought into the UK, effective from 1 January 2021. This allows UK businesses importing goods to account for import VAT on their VAT return rather than paying it on or soon after the goods arrive at the UK border, providing a significant cash flow benefit.
Furthermore, how UK businesses claim refunds of VAT from EU member states has been altered post-Brexit. The process now aligns more closely with non-EU companies' use, which may require additional administrative effort for UK businesses. Brexit has also led to removing low-value consignment relief, meaning that all goods entering the UK as parcels sent by overseas companies are liable for VAT.
In terms of service provision, the rules for the place of supply of services have been modified. UK businesses supplying digital services to non-business customers in the EU now face different VAT requirements, with VAT on services being due in the EU member state where the customer resides. These changes underline the complex and evolving nature of VAT regulations in the post-Brexit era. Therefore, businesses must stay informed and adapt their operations accordingly.
For comprehensive guidance and assistance during this transition, companies can explore the range of services offered by Hammond Barr, a reliable partner in navigating the complexities of VAT registration and other financial matters.
New VAT Rules and Procedures for Second-hand Vehicle Dealers
Post-Brexit, several changes in the VAT rules have directly affected second-hand vehicle dealers based in Northern Ireland. One of the significant changes is the restoration of the benefits associated with the second-hand margin scheme. This scheme is particularly beneficial for businesses that deal with used goods, such as second-hand vehicles. This scheme's restoration means businesses can reclaim VAT on the margin, that is, the difference between what they paid for the car and what they sold it for. This scheme, which applies to sales to both Northern Ireland and the EU, is a significant relief for businesses as it can lead to considerable savings.
In addition to the second-hand margin scheme, there have also been changes in the procedures for claiming input tax on the purchase of vehicles. In some cases, businesses can recover the VAT they have paid on purchasing used cars. This is a significant change and provides an additional financial benefit to second-hand vehicle dealers.
Moreover, the VAT rules for supplying services between the UK and EU member states have also been impacted by Brexit. Notably, the VAT on services is now due in the EU member state where the customer is a resident. Understanding these changes is crucial for dealers offering services such as vehicle maintenance or repair to ensure compliance and avoid penalties.
It is vital that businesses fully understand these changes and adapt their practices accordingly. For further guidance, consider exploring the comprehensive range of accountancy services Hammond Barr offers. Their team of experts can provide invaluable assistance in navigating these new VAT procedures, ensuring your business remains compliant while maximising tax efficiency.
Conclusion and Next Steps
Navigating the shifting landscape of VAT procedures for UK businesses post-Brexit is, without a doubt, a challenge with significant implications. The removal of low import VAT relief, changes in the sale of low-value goods to UK consumers and VAT-registered UK customers, and alterations in EORI numbers, commodity codes, and tariffs are just a few modifications that demand attention. For businesses trading goods with EU countries, these changes are not just administrative details but factors that could significantly impact their bottom line.
Acknowledging the complexity of these changes, it's crucial to consider seeking expert assistance. With our adept team of AAT-qualified technicians, Hammond Barr is equipped to guide this transition. Their wide range of services, designed to help businesses grow their tax-efficient sales and profits, can be valuable in navigating post-Brexit VAT adjustments. These services extend beyond just advice, encompassing tax planning, bookkeeping, payroll, and VAT returns, all catered to help businesses focus on their core operations.
In these times of change, being proactive and informed is crucial. Utilising the expertise of professionals like the team at Hammond Barr can be a strategic move to ensure the smooth transition of your business through the post-Brexit changes.
Contact us today for a comprehensive understanding of how Hammond Barr can assist your business.
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