The UK stopped being part of the single market and the EU customs union on 1 January 2021. Our tax experts from TPA Austria have here a Brexit-Checklist for companies active in Austria.
A trade and partnership agreement was struck at the eleventh hour on 24 December 2020, which stipulates the following points in particular:
- Duty-free movement of goods
- Unlimited movement of goods in terms of volume
This duty-free and unlimited movement of goods is, however, contingent on certain criteria being met (in particular proof of preferential origin).
Check no. 1: VAT
Deliveries made to companies in the UK are now deemed as exports, not intra-Community dispatches.
Exports are exempt from tax under the following conditions:
- The item is transported or dispatched abroad OR
- The item is transported or dispatched abroad by a foreign buyer AND
- There is an export certificate
- Where goods are dispatched, by means of evidence such as waybills, postage receipt, bills of lading, export certificates from forwarding agents, export records, written export declarations (with customs confirmation of export)
- Where goods are transported, by means of written export declarations (with customs confirmation of export), export records
- Documentary evidence that the conditions have been met
If the conditions for tax exemption are fulfilled, the delivery essentially remains tax exempt. Please note the following practical differences compared with intra-Community deliveries:
- Buyer’s VAT ID number: Previous British VAT ID numbers are no longer valid. In contrast to intra-Community deliveries, the buyer’s VAT ID number is not a condition for tax exemption.
- Recapitulative statement: Deliveries no longer need to be included in the recapitulative statement.
- The rules for simplified triangulation transactions no longer apply when UK companies are in the supply chain
- Consignment stock: This regulation only applies within the EU and is no longer applicable for deliveries to the UK. It is possible, by way of alternative, to consider treatment as a bonded warehouse to “delay” the tax liability. However, the goods are essentially classed as imports to the UK.
Check no. 2: Import VAT / customs declaration in the UK
Although imports generally remain duty free, importers into the UK must register for tax purposes (importer of records) and apply for a UK EORI number.
When importing, a customs declaration must be submitted and import VAT paid. The agreed Incoterm generally determines whether the obligation to handle the import formalities falls to the buyer or the supplier, with FCA and DAP normally being preferred by suppliers. In our experience, however, agreements are often formed with DDP, which states that the supplying company is responsible for handling import formalities. In such cases, a customs representative is usually required for foreign companies without a branch in the UK.
Check no. 3: Careful when Northern Ireland’s involved
Remember when delivering to customers in Northern Ireland: Northern Ireland has a special position when it comes to the trade in goods, remaining in the EU single market and customs union.
This means that deliveries to customers in Northern Ireland will continue to be treated as intra-Community dispatches.
Check no. 4: Importing from UK into Austria
The intra-Community purchase of goods from the UK has also ended with effect from 1 January 2021. Goods must now be declared for free circulation as is the case from any other third country – even if no customs duty is normally payable – and the legally owed import duties must be processed. Preference will generally be given to the simplified procedure for handling import VAT. The procedure must be requested when the customs declaration is made, although in this case the import VAT is determined by the tax office. The requirements here are:
- The exact company name being specified in the customs declaration
- The tax office and tax number is indicated
- The VAT ID number is provided
- Declaration that the business is entitled to have the input tax on the imported goods deducted in full
The advantage offered by this procedure is that the import VAT – if it can be deducted again as input tax – does not have to be “financed” because it can be deducted in the same assessment period.
Check no. 5: e-Commerce
Please note the following changes, some of which were introduced in the UK in addition to Brexit with effect from 2021:
- Abolition of GBP 15 relief for online sales (no more low value consignment stock relief)
- Obligation to charge UK VAT on sales with a value of less than GBP 135 (with simplified customs declaration)
- “old” procedure for sales with a value exceeding GBP 135: Tax registration is required.
- If shipment is handled by an online market place, the online market place itself is liable for the VAT (“deemed supplier”).
Check no. 6: Services
No significant changes to VAT treatment are expected in the service sector:
- Services to businesses are generally subject to VAT at the place of receipt. This means that UK VAT law applies to services rendered to UK-based businesses. It is worth mentioning at this juncture that there were already a number of major differences to our laws and these have been further expanded.
- In principle, however, the reverse charge procedure applies in most cases in the United Kingdom and the tax liability is transferred to the recipient of the service.
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