Business Taxes and Brexit – What do you need to know? Garbutt + Elliott update – October 2019

This update is on the assumption that there will be a No-Deal Brexit. Unless you do business with Europe there is little immediate change that will affect you, however, if you do business with Europe please note that VAT and Customs Duties will see the biggest changes.

Here are some important points to note:

Importing and Exporting to the EU

  • An Economic Operator Registration and Identification number (EORI number) is an EU registration and identification number for businesses which are involved in importing or exporting.
  • Before Brexit a UK business usually only required an EORI number if it was involved in trade in goods with businesses located outside of the EU. After Brexit UK businesses will require a UK EORI number for trade with the EU. Depending on the supply chain a UK business may also need an EU EORI number.
  • HMRC have recently been issuing EORI numbers to those they think trade with the EU. See also www.gov.uk/eori
  • Businesses will need to factor in the additional cost of customs duty when goods move between the UK and the EU after Brexit. The cost will include the duty itself, which unlike VAT cannot be recovered, and the administrative cost of identifying the correct customs value and classification code.
  • Supply chains should be reviewed with a view to mitigating the cost of customs duty. For example, a UK business could consider a supply chain where goods it sources from China for the EU market do not enter the UK.
  • Businesses should also consider who will make the customs declarations.
  • Businesses that sell goods or electronic services to consumers in the EU should consider action to reduce the possibility of having to register for VAT in each EU country where consumers are located. Examples of actions to consider are (a) registering for VAT in an EU country, or (b) selling to an EU business that makes the onward supply to EU consumers.
  • Reclaiming VAT paid in other countries will have to be done directly with that country, rather than through the UK VAT portal with HMRC.
  • If you supply cross-border digital services to non-taxable persons then consider registering for MOSS (“Mini-One Stop Shop”) in just one EU country as a proxy for all.
  • Importing – consider applying to use ‘transitional simplified procedures’ to reduce the amount of information required at the border. You may also be able to use the Common Transit Convention (CTC) to simplify.
  • Set up a duty deferment account and/or Simplified Import VAT Accounting (SIVA) or SIVA if you import regularly. Guarantees will be required.

Direct Taxes

  • Withholding tax rates on interest, dividends and royalties within the EU are normally nil (assuming the right approvals) but the post-Brexit position is unclear. In most cases such tax deducted from payments to you will still be refundable, or deductible to an extent, as a credit against UK tax. Companies with EU subsidiaries/group companies should consider both the risk and benefits of accelerating dividend, interest and royalty payments into the UK prior to Brexit.
  • If you are thinking of setting up a subsidiary in the EU to deal with Brexit please note that, at present, the benefits are unclear and such a structure will have different permutations depending on what the Brexit exit terms are.

For further information please speak contact Garbutt + Elliott contact on 01904 464100 or email tax@garbutt-elliott.co.uk

You may find the following links helpful:

https://www.garbutt-elliott.co.uk/blog/brexit-and-eu-vat-updates/

https://www.garbutt-elliott.co.uk/blog/your-six-steps-to-exporting-goods-after-brexit/