HMRC update their policy papers on goods and services moving to and from the EU after 1 January 2021
Jan Garioch CA discusses updates published in December 2020 to two policy papers on Brexit Transition.
Goods moving to and from the EU
HMRC have updated their policy paper Goods moved between Great Britain and the EU from 1 January 2021. This forms part of the Brexit Transition section on GOV.UK website. It contains links and signposts to where further information is to be found on the website, but acts as a headline introduction to how much changes from 1 January 2021.
- Business to business sales of goods from the EU to the UK will become imports, and customs declarations will be required.
- Business to final customer sales of goods from the EU into the UK will cease being distance sales. The sellers will have to acquaint themselves with how to account for VAT depending upon whether they sell directly to the customer or on an online marketplace.
- Sales of goods from the UK to EU business customers, which were dispatches, become exports. They continue to be zero-rated but reporting requirements change. Sales to non-business EU customers also become exports and follow the same rules.
- Goods imported from outside GB are not eligible for the margin scheme. This will see a change for antiques and other margin scheme items, such that normal VAT rules will apply.
- EU rules for new means of transport cease to apply. Vehicles, ships and aircraft being sold to and from the EU will be treated as exports or imports.
- The intra EU simplifications of triangulation and call off stock simplification fall away.
- Fiscal warehousing changes. Goods will have to exit a fiscal warehouse in the UK and be subject to the appropriate VAT before entering the fiscal warehouse in the EU or Northern Ireland.
Services moving to the EU
HMRC have also updated their policy paper Accounting for VAT on services between the UK and EU Member States from 1 January 2021. This paper is shorter than the one on goods. The brevity arises because the end of the Brexit transition period means that the VAT rules applying for services supplied between the UK and remaining EU member states become the same as the current rules for supplying services from the UK to outside the EU.
Despite this being a brief paper, a considerable amount of adjustment is required for some businesses. In particular, businesses selling digital services like the supply of software to and from the EU will cease to be able to use the VAT Mini One Stop Scheme. The key benefit of that scheme was not having to be registered for VAT in every EU member state that a business sells to. Therefore, this change brings new administrative burdens.
Suppliers of finance and insurance services face the change that they can recover input VAT incurred to make:
- financial and insurance services to customers who belong anywhere outside the UK
- financial and insurance services directly related to an export of goods
- the making arrangements for the above.
While ensuring their reporting systems are ready for this change, they must take care of the cut off point as VAT incurred before the end of the transition period to make specified supplies to customers belonging in the EU cannot be recovered.
One item which can be crossed off the VAT manager’s task list is the submission of the European Community Sales List. These are not required from UK businesses after 1 January 2021.