Monthly Archives: January 2021

VAT – Post-Brexit arrangements

The latest guidance on VAT on imports and services to and from the EU is complex and businesses need to account for this in their trading.

To help we have provided a brief summary below, but we highly recommend you seek additional advice.

Import VAT

Goods that move into the UK from the EU from 1 January 2021 onwards will be considered imports, meaning import VAT will be payable and customs declarations will need to be made.

Businesses must account for VAT on all goods imported using a postponed accounting system. This means that import VAT is accounted for and paid via the usual VAT return, which will lead to an improved cash flow position for many businesses.

This applies to all goods imported by VAT registered importers to the UK, including those from the EU. In most cases, import VAT should be recoverable by businesses.

Accounting for import VAT on your VAT return

Businesses have to account for import VAT via their VAT return under the postponed accounting system if the goods they import are for use in their business.

A business must include its EORI number starting with ‘GB’ on its customs declaration and its VAT registration number if it is needed.

It can then account for import VAT on its VAT return when it submits a declaration that releases those goods into free circulation from one of the following special customs procedures:

  • customs warehousing
  • inward processing
  • temporary admission
  • end use
  • outward processing
  • duty suspension.

A business can only account for import VAT on their VAT return once they release excise goods for use in the UK – also known as ‘released for home consumption’.

If the business imports goods that are not controlled into Great Britain from the EU, between 1 January and 30 June 2021, they must also account for import VAT on their VAT return, even if they delay the customs declaration or use a simplified customs declaration to make a declaration in their records.

Deferring VAT

New rules for VAT deferment apply in Great Britain, which allow businesses that import goods regularly, to apply for a deferment account to delay paying most customs charges, including import VAT.

Through this account, a business can make a single payment each month via direct debit instead of paying for each consignment separately.

The scheme is open to importers or customs agents and freight handlers that work for importers and have an approved deferment guarantee or waiver in place.

Regardless of the method of accounting for VAT on imported goods, checks to ensure that the data on the customs declarations is accurate will continue to be highly important for VAT purposes, for all imports.

Consignments of value below £135

Imported goods in a consignment not exceeding a value of £135 (€150), excluding specific excise goods and gifts, will not be subject to import VAT at the border and will be subject to sales (supply) VAT instead.

This will end the £15 VAT exemption thresholds previously known as low-value consignment relief and VAT will now be charged on the goods as if they were supplied in the UK and accounted to HM Revenue & Customs on the UK VAT return.

This means that businesses selling goods to be imported into the UK with a value not exceeding £135 will be required to charge and collect any VAT due at the time of sale.

For UK VAT registered businesses importing goods in a consignment not exceeding £135 in value that has not been charged VAT at the time of purchase they can account for this VAT on their VAT return under the usual reverse charge method.

Place of supply

Businesses must determine the country where a supply takes place for VAT purposes so that they know where VAT due is payable.

Businesses should be aware that they may continue to create VAT liabilities in other EU Member States. This may mean that businesses in the UK require multiple EU VAT registrations within each member state that they trade within.

Reclaiming VAT in the EU

Currently, UK firms incurring VAT in EU countries can claim VAT back (subject to national rules) via HM Revenue & Custom’s dedicated refund portal.

That arrangement will remain in place until 31 March 2021, after which time, there is currently no provision in place to claim for VAT incurred in 2020, under the terms of the Withdrawal Agreement.

Impact on services

Post-Brexit there should be minimal impact on the supply of services. Business to business services are treated as though they are supplied where the customer belongs and that customer must account for the local VAT.

This will mean that for UK service suppliers they will continue to not charge UK VAT. For business to consumer supplies, UK VAT generally applies and this will also remain the same.

When receiving services, UK businesses may still have to apply a reverse charge to the receipt of services from non-UK suppliers. This ensures that there is no competitive advantage from sourcing services via non-UK suppliers.

Are you making full use of the Government’s COVID-19 financial support package?

Download our latest guide to make sure you are taking advantage of the support on offer

As we enter yet another national lockdown, businesses may be concerned about their ability to survive and succeed in the weeks and months ahead.

The level of support on offer from the Government and local authorities is unprecedented via the various grants, loans and payment holidays now available.

To help you make sense of these schemes, our experienced team have put together a helpful table covering the eligibility for each scheme and how you can apply, which we encourage you to download and read.

Click here to download our latest Summary of UK Government Funding

Businesses should assess their current financial position now and seek the support they require as soon as they can.

Our team are standing by to help businesses with their applications for grants and loans and the ongoing requirements of the furlough and self-employment schemes.

To find out how we can assist you, please contact us today.

Chancellor announces grants worth up to £9,000 for businesses in the retail, hospitality and leisure sectors

The Chancellor, Rishi Sunak, has announced a package of one-off grants worth between £4,000 and £9,000 for businesses in the retail, hospitality and leisure sectors, following the announcement of a nationwide lockdown in England lasting until at least mid-February.

The new scheme will be accessed through local authorities and offers funding based on the rateable value of a closed business’s premises:

  • £4,000 for businesses with a rateable value of £15,000 or less;
  • £6,000 for businesses with a rateable value of between £15,000 and £51,000; and
  • £9,000 for businesses with a rateable value of over £51,000.

This funding comes in addition to the existing Government business support schemes, including grants of up to £3,000 a month for closed businesses.

The Chancellor has also announced a further £594 million for local authorities and the devolved administrations to support businesses that are not eligible for the new grants. The devolved administrations will additionally receive equivalent funding to the main grants to distribute as they see fit.

The Chancellor said: “The new strain of the virus presents us all with a huge challenge – and whilst the vaccine is being rolled out, we have needed to tighten restrictions further.

“Throughout the pandemic we’ve taken swift action to protect lives and livelihoods and today we’re announcing a further cash injection to support businesses and jobs until the spring.

“This will help businesses to get through the months ahead – and crucially it will help sustain jobs, so workers can be ready to return when they are able to reopen.”

For more information about the support available to businesses during the pandemic, please visit the Coronavirus hub on our website.