HMRC advice about Brexit

Brexit tax advice

HM Revenue and Customs (HMRC) is currently urging businesses to prepare and consider steps to ensure they can continue to trade within the EU market in case of a no deal Brexit. Procedures such as customs declarations, the VAT Number and IT systems will be subject to changes. Businesses that act now will benefit from an easier transition when (assuming it happens) the changes become permanent. Of course this particularly impacts businesses who currently import and export a lot of goods to and from the EU. These VAT changes are unlikely to apply to business who import and export to Northern Ireland as the Government is trying to avoid a hard border in any circumstances.

Customs declarations

In a no deal scenario, businesses will be confronted with customs declarations for their trade between the UK and the EU. The simplest way to submit customs declarations is through a customs agent who manages the process. However, before a business can appoint a customs agent, it needs to register for their Economic Operator Registration and Identification (EORI) number.  Businesses who trade with suppliers or customers outside the EU probably will already have an EORI number. Businesses need to appoint a customs agent to make declarations as soon as possible to prevent congestion problems as everyone else will be trying to to the same thing as the exit deadline approaches.

Some business might not think it is the best solution or are unable to appoint an external agent to monitor the declaration process. It is an important decision for those businesses who expect to import or export regularly but might consider operating the domestic market. As an alternative a business could appoint a specialist employee or partner from the company. In this case, it is important that the person appointed is properly trained for these processes. Specialist software can be purchased which is compatible with the HMRC’s customs systems and to link them together so they support the customs declaration process.

Businesses planning to export their goods to countries outside the EU must use the National Export System (NES) to declare their exports. The computer-based system known as NES allows export declarations to be submitted electronically instead of the traditional manual mehtis. The NES operating system relates to the nationwide electronic Customs Handling of Import and Export Freight (CHIEF), which controls movements of international cargo. The use of NES is mandatory for business who need the authorisation to export products to other countries. The Export Control System (ECS) is the electronically controlled system of the EU and was incorporated into CHIEF in the UK. Therefore, businesses do not need to submit a separate safety and security declaration as the CHIEF incorporates the ECS. Bear in mind the ECS will cover goods that are in transit within the EU before being exported to a third (non-EU) country.

Making importing easier

The new Transitional Simplified Procedures (TSP) was introduced by the HMRC for customs. As the name implies it is intended to make the declaration procedures simpler for the initial period after the UK leaves the EU in case of a no-deal. The procedure enables those importing goods into the UK  to file a full customs declaration at the border. Also, businesses will be able to postpone the payment of import duties if they need to.  However, it remains mandatory to provide crucial information before the import to control the goods. In order to use these benefits, businesses need to sign up online and will need an EORI to be eligible. The Government gives further handy guidance through their website on the subject and includes which ports are TSP proven.

Changes to VAT and IT System

The way businesses will be accountable for VAT on import will change. Businesses will be able to pay import VAT for import on their next VAT return rather than immediately when their goods arrive at the UK border. Meaning that any company will be able to declare and recover import VAT on the same VAT return. Businesses are required to provide their VAT registration number on their customs declarations. Further information about other changes will soon be available on the Government’s website.

If it is decided that the UK is going to leave the EU without a deal there will be an impact on the use of EU VAT IT Systems. Certain systems shared with the EU will not be used anymore. Business presently using one or more systems should be aware of the next changes in regulations and processes. For example:

  • Claim VAT refunds from EU member states.
  • Need to check the validity of UK VAT registration numbers.
  • Report sales of digital services to consumers in the EU using the UK VAT Mini One Stop Shop.
  • The VAT on digital services or digital sales to consumers in the EU.

The HMRC, for now, has guidelines for businesses on these subject and will update when further details are known and available.

The EU VAT Refund Electronic System

With the UK leaving the EU the use of the EU VAT refund electronic system to claim refunds will not be possible anymore for UK businesses. Businesses who still want to make use of the system for 2018 and 2019 transactions, will need to submit a refund claim before 5 pm on the day the UK leaves the EU. For all claims submitted after that, the HMRC will be unable to send on to the relevant EU member state. After the separation businesses must claim VAT refunds by using the relevant member state’s existing process for businesses outside the EU. This includes the outstanding claims on VAT incurred on expenses in 2018 and 2019. Refund periods may differ for each country. Business may need a certificate of taxable status to support the claims and they may need to appoint a tax representative in the EU member state of refund. It is recommended for each business to be informed about the VAT claim process of each EU member states in order to be prepared.  

The EU’s VAT number validation services (VIES)

The UK VAT numbers will no longer be part of the service of VIES. This might make it difficult to check customers or suppliers’ VAT number by using VIES. The UK Government will launch a check UK-only VAT number website available after the separation from the EU. However, businesses will still be able to use VIES to validate EU VAT numbers

The UK VAT Mini One Stop Shop (MOSS)

MOSS could be used by businesses to declare sales of digital services to EU consumers incurred before the UK leaves the EU. Businesses should use the UK’s MOSS portal to submit their returns and make corresponding payments as normal for periods where your business was registered for the UK VAT MOSS service. Only the sales of digital services incurred before the UK leaves the EU will be eligible to declare VAT from UK or EU consumers. The calendar quarter in which the UK leaves the EU will be the business’ final return period for the UK MOSS. If a business decides to continue to use MOSS they will need to register for MOSS in an EU member state.

This is a summary of the main currently available information regarding changes affecting import and/or export businesses after the UK exits the EU. Businesses need to be aware of these changes and act accordingly in order to smooth the transaction period or just to be prepared when the moment arrives for Brexit.



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