Fact or Fiction: Brexit rumours explained
The finalisation of Brexit is rapidly approaching, and at this point in time there is a lot of uncertainty about the situation after December 31, 2020. Negotiations are currently underway between the United Kingdom (UK) and the European Union (EU), but a solution is not yet within reach. Some official information has already been made available. In addition to this, a lot of unofficial information is going around. We have collected a number of rumours about Brexit, which we would like to share and discuss with you.
If the negotiations fail, there will automatically be an extension of the deadline and the transitional period will not end on December 31, 2020.
Fiction. Even with the coronavirus delaying the process, the UK has announced that Brexit will not be delayed and that as of January 1, 2021, the UK will leave the EU, with or without a deal.
The UK is already making changes and deviating from the current EU rules in the run up to December 31, 2020.
Fact. The UK is already preparing and implementing changes, related to for example online tools for customs and for accounting import VAT.
After Brexit (as of January 1, 2021), it will be impossible to obtain a refund of UK VAT if you do not have a UK VAT reporting obligation.
Fiction. UK VAT originating from before January 1, 2021, can still be reclaimed by EU companies until March 31, 2021 (11 pm), using the (current) electronic VAT refund system.
An EU company does not need UK tax representation when doing business in the UK.
Fact. Although, in the opposite situation, some EU countries will require UK companies to appoint a tax representative for VAT purposes while doing business in or from that EU country, the UK has not announced such legislation for EU companies (yet).
When importing goods into the UK, you are still allowed to engage a customs representative established in the EU after December 31, 2020.
Fiction. Your customs representative, assisting with UK customs matters, must be a company established in the UK.
When trading with the UK, your current supply chain could be faced with challenges, because flows of goods could be delayed due to Brexit.
Fact. Delays are expected due to customs formalities. If no deal is reached, goods will have to be imported into the UK and exported out of the UK, and (physical) checks might be carried out. The UK has already announced a shortage of Customs authorities staff, so delays are to be expected.
Upon importing goods into the UK, UK VAT is always due immediately.
Fiction. If your company is already registered for VAT purposes in the UK, it is possible to account for the import VAT due in the UK VAT return, under the deferred import VAT scheme called Postponed Accounting. This is comparable to the Dutch import VAT deferment license.
When selling and transporting goods to consumers in the UK, it is recommended that you are extra careful after Brexit.
Fact. It is possible that VAT obligations will arise at the moment of the first post-Brexit supply. Therefore, it is recommended that you determine your VAT position proactively. If you are selling through a webshop and transporting goods to UK consumers, please find our overview of the points of attention here.
If I wait for the outcome of Brexit, there will be plenty of time to prepare my business for this in December 2020.
Fiction. Brexit preparations can take anywhere from a few months to a year, depending on the complexity of your business. Examples are adjustments to your ERP systems, renegotiating contracts, or concluding contracts with customs representatives or agents. These steps will all take more than a month to complete.
We understand that, while the EU and the UK are still negotiating, it is difficult to determine the next steps. Therefore, it is important to stay informed. If you would like to learn more about Brexit, or if you would like to discuss your position, please feel free to contact Marisa Hut or Barthold Bergman of VAT & Customs Advisory.