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By Yasmine Lingemann

IN BRIEF:

  • VAT will now be collected at the point of sale instead of at the point of importation. 
  • This means that non-UK retailers who are selling goods directly to a UK consumer with a sale value of less than €150 (£135) must:  
    • Register for UK VAT with HMRC  
    • Collect UK VAT from the consumer 
    • File VAT returns 
    • Send VAT to HMRC 
  • The EU are also implementing their own VAT system in July 2021 – where non-EU sellers must register once for the whole EU market.  

WHAT IS THE IMPACT ON BUSINESS?

While organisations would have welcomed the trade deal between the U.K. and EU, signed on December 30, 2020, it came so close to the end of the Brexit transition period on December 31, 2020 that many had insufficient time to fully understand its implications on their activities before it took effect. As people return to work their focus will now be on understanding what changes have taken place as a result of Brexit and the terms of the deal. The economic repercussions of Brexit have been challenging to many, so it is very important businesses familiarise themselves with the changes, so to benefit the most in this difficult time.

Much has been written in the press about how these VAT changes make life more difficult for non-UK businesses. However, if those businesses were already making sales valued at more than £70,000 a year into the UK they would have already been VAT registered and charging UK VAT to customers.  If the packages being delivered are under £135 in value there will be no import VAT or duty to pay and hence, their situation will remain largely unchanged save for the need to complete customs declarations.

For businesses that were not already UK VAT registered and have packages valued at more than £135 or sell via OMP, the position is more complicated.  To determine what your obligations are we would recommend reviewing the following questions:

1. What is the value of my package?
2. If selling via an OMP will you met the conditions for them to take on your obligations to account for UK VAT?
3. If your packages are going to be over £135, what will the customer experience be like if they have to pay extra import costs in addition to your charge?
4. If packages are over £135, will any duties be payable?

Generally, most of the UK’s VAT rules applicable to organisations providing services remain unchanged post Brexit. Specifically, there were no widespread changes to the place of supply provisions (rules that determine the country in which VAT is paid) or rates of VAT. However, changes were made in other areas, and it’s important you familiarise yourself with these changes so that you don’t lose out as a business.

For example, EU retailers sending packages to the UK now need to fill out customs declaration forms. Shoppers may also have to pay customs or VAT charges, depending on the value of the product and where it came from. However, customs charges are the responsibility of the customer, not the retailer, who often has no idea of how much the eventual extra cost might be. They cannot be paid in advance and are levied only when the item reaches the UK.

The end of the Brexit withdrawal period has resulted in many UK VAT rule changes, and organisations will need to adapt to new VAT accounting arrangements. We recommend  that organisations review their sales and purchase transactions and administrative processes to ensure that any changes to the VAT rules have been identified. This will help guard against unexpected costs.

We are here to help you. Head over to our new website here, where you can find support in our Brexit Hub, and get in contact with us or our network to make sure you adapt to these new changes successfully.

THE FACTS:

VAT on GOODS COMING INTO THE UK: https://www.gov.uk/guidance/eu-business-exporting-to-the-uk

UK VAT registered businesses importing goods into the UK are able to account for import VAT on their VAT return, rather than paying import VAT on or soon after the time that the goods arrive at the UK border. This applies to imports from the EU and non-EU countries. 

However, customs declarations and the payment of any other duties are still required. Customs duty (tariffs) applies to some goods and excise duties continue to apply to tobacco, alcohol and certain energy products. Customs and excise duty payments can be deferred to be settled monthly with a duty deferment account. Businesses need to register with HMRC to open a duty deferment account and will need to provide a bank guarantee.

Since 1 January 2021, VAT on imported goods with a value of up to £135 is collected at the point of sale not the point of importation. This means that UK supply VAT, rather than import VAT, are due on these consignments.

Online marketplaces (OMPs) involved in facilitating the sale of imported goods, are responsible for collecting and accounting for the VAT, even when the goods are in the UK at the point of sale.

For goods sent from overseas and sold directly to UK consumers, the overseas seller is required to register and account for the VAT to HMRC. Overseas sellers also remain responsible for accounting for the VAT on goods in the UK when sold directly to UK consumers.

Business-to-business sales not exceeding £135 in value are also be subject to the new rules. However, where the business customer is VAT registered and provides its registration number to the seller, the VAT will be accounted for by the customer by means of a reverse charge. 

AT THE UK BORDER:

Fiscal compliance checks at the UK border include checks to confirm the correct valuation for goods declared at import. Current requirements for importers and agents to assure the completeness and correctness of declarations will remain. Systems should be extended to cover EU imports with a view to identifying false information from consignors, to assure HMRC that clear anomalies can be pulled out from the high scale of declaration volumes typically handled. In particular, importers and agents will need to ensure their systems can identify consignments that are outside the scope of the new arrangements and thus remain liable to import VAT.

Vigilance around consignment valuation will continue, but with more focus on the declaration boundary at £135 or less for this policy. Systems will need to identify excise goods and goods being sent by one private individual to another, which are outside the scope of the new arrangements.

VAT ON GOODS COMING OUT OF THE UK: https://www.gov.uk/guidance/eu-business-importing-from-the-uk

Check with your EU country’s customs authority about the rules for sending goods to the UK from the EU. Make sure you talk to your trading partners in the UK to:

  • agree responsibilities
  • make sure you have the correct paperwork for the type of goods you are trading

You must make sure you have completed the necessary border requirements.

There will be no substantive change for the movement of goods between Northern Ireland and member states of the EU, including Ireland.


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Here at the British Chamber of Commerce, we will continue to update you with the necessary information to help all our members to succeed. We are all in this together, and with the right plans in place, consumer confidence can be restored. BritCham offers support, guidance and specialised coverage for both Brexit and COVID-19, including webinars, workshops and events that will give your firm the tools it needs to navigate through this challenging period.

See our website here for more details on how we can help you: https://www.britishchamber.be/


Before 1 Jan 2012 the circular letter from 1986 stated that statutory contributions (membership fees) were exempt from VAT but other specific services for specific members – not related to lobbying – were subject to VAT.

But the rules were never consistently applied, some associations had an 100% exemption agreement (written or not), and some were 100% subject to VAT, hence why the Belgian government wanted to standardise it.

A new circular letter, issued by the Belgian government and applicable as of 1 Jan 2012, says that if “representing your members” – with services as a counterpart of the membership fee or services of a trade-union nature that are in the interest of the membership as a whole – is the main activity of your association, you’re exempt from VAT when invoicing these fees, but no input VAT can be recovered. The letter also provides with a series of questions to determine if your main objective is representing your members or not.

Membership fees can thus be exempt from VAT, but additional invoiced services are applicable to VAT, but this has to be noted in separate sector agreements. If this agreement is accepted by the VAT authorities, you can also recover VAT for costs related to the separately invoiced service e.g. events or business services but also general cost such as electricity telephone etc.

Lionel also mentioned that these days Belgian VAT inspectors are much smarter (and up to date with modern technology) then in the old days. They check your website to see what your claimed activities are and they even check if you’re listed on the transparency register as a clear indication to offering lobbying services to your members. They can even check internal documents such as minutes from board meetings to see if policy positioning is discussed or not! All this is to determine whether or your organisation is actively lobbying on behalf of its members!!

Above all it all comes down to what your main activity is…

As of 1 Jan 2012 all existing agreements were ended, so all associations need to redefine their main objective to determine their new status regarding VAT and if you negotiate an agreement with your VAT inspector, make sure you have written proof of the agreement, you never know if the next inspector will respect a verbal agreement you had with his predecessor…

Another important point that was highlighted in the discussion is that all associations should have a VAT number, this is due to having to pay VAT on services invoiced from outside of Belgium, even if they are 100% exempt of VAT in their Belgian internal activities

Lionel also warned us to not forget the VAT revisions!

It was an interesting presentation – see slides here – and Lionel answered many (difficult) questions.

I hereby like to thank Lionel for his presentation and to those present. Also many thanks to PwC for sponsoring this session.

Topic: What is the impact of the new position of the VAT authorities sector and trade associations?

Speaker: Lionel Wielemans, VAT Senior Manager – PwC

Monday, 16 April 2012

Petra

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