International VAT Pitfalls and Developments Presented by: Nancy Cruickshanks, Shipleys LLP & Claire Taylor, Simply VAT

International VAT: Pitfalls and Developments It’s VAT but not as we know it. I relied on the freight agent. The VAT man comes to call What’s new

International VAT: Pitfalls and Developments It’s VAT but not as we know it “All my cross border transactions are with Overseas Businesses so they are VAT exempt – correct?” No! Consumers Land Events Withholdings Consumers – different rules depending on situation General rule – based on supplier location Long term hire of means of transport Valuation of or work on goods Land and similar place of performance services Usual suspects Hotel accommodation Restaurants and catering Events B2B – admission B2C – admission and other cultural, artistic and educational services Withholdings Non-EU – in lieu of reverse charge Misuse of reverse charge within the EU

International VAT: Pitfalls and Developments It’s VAT but not as we know it “if I’m selling goods to overseas consumers I just worry about UK VAT – correct?” NO! Fulfilment centres e.g. Amazon (FBA) Distance Selling thresholds EUR 35,000 most EU countries; EUR 100,000 DE, Lux, NL UK - £70,0000

International VAT: Pitfalls and Developments It’s VAT but not as we know it B2C Digital Services – VAT MOSS Since Jan 2015, VAT is accounted for where the customer is Reporting via VAT MOSS in local Member State E-Service Vs non E-Service

International VAT: Pitfalls and Developments It’s VAT but not as we know it Ignorance is bliss – but only while it lasts … Different VAT Rates in different EU member states Different VAT Registration rules e.g. Fiscal Reps for non-EU countries

International VAT: Pitfalls and Developments I relied on the freight agent “There’s VAT on the bill from the freight agent – I can claim that back can’t I?” Maybe not! UK Freight Imports UK EORI Number Box 8 of C88 C79 – UK Import VAT Certificates UK Freight VAT element does not mean VAT is being charged – may be a disbursement UK freight services – yes VAT is being charge Imports Very formalised system – strictly enforced by HMRC Mistakes happen a lot Clear advice difficult to get EORI Keys to the kingdom Not automatic – need to apply Make sure the freight agents use it Import VAT certs Check them If in doubt – don’t claim

International VAT: Pitfalls and Developments I relied on the freight agent “The freight agent handled the export from the UK so I don’t need to account for VAT on the sale … or do I?” Maybe! Distance Sales Time limits Documents/Evidence of export No removal from UK Consumers Distance selling – again Time limits Direct exports – removal from EU and obtain evidence within 3 months Indirect exports – time limit is 6 months HMRC do enforce these limits and will penalise for failures Documents HMRC National Export System – computer generated message confirming departure Commercial transport evidence: authenticated sea/air waybills Supplementary evidence: customer order; sales contract; correspondence; invoices; insurance documents No removal Seems obvious – if it doesn’t leave the UK you cannot zero rate even if billing an overseas customer

International VAT: Pitfalls and Developments The VAT man comes to call “The last time we had a VAT inspection we got a clean bill of health so everything is fine isn’t it?” Maybe! Inspection – not an audit New laws New activities VAT inspections are rare – more likely to get a letter or a phone call Correspondence can take months to resolve Things get forgotten due to the time lag between items of correspondence VAT officers often take a harder line when they are not facing you in a meeting They only look at things from the UK perspective so will not be able to confirm whether your business has foreign VAT obligations Quality of the advice is extremely variable Legal changes Some people are still not aware of the 2010 and 2011 PoS changes HMRC do expect businesses to keep up to date with relevant VAT developments If HMRC point you towards a reference source – make sure you read it and keep records New activities Make sure to check the VAT position of any new activities especially in the cross border context

International VAT: Pitfalls and Developments Recent developments Brexit Business as usual Hope for the best – plan for the worst Greater reliance on freight agents Import VAT cashflow HMRC systems and staffing Foreign VAT Business as usual = message from Government and HMRC Article 50 to be triggered by March – leaves just over 2 years to prepare – not much time if system changes are required. May see the end of ECSLs and Intrastat but the replacements will be import and export declarations – so greater reliance on freight agents May see the end of acquisition VAT but the replacement will be import VAT: Consider getting a duty deferment account. Make sure you have an EORI Task someone with reconciling the two and checking the entries HMRC systems and staff may not be geared up for the increased traffic – build in extra time. May see the return of Customs’ inspections for intra-EU movements – build in extra time. Foreign VAT may become even more difficult to reclaim.

International VAT: Pitfalls and Developments Other developments EU changes and Proposals Cross border rulings VAT Action Plan UK Changes and Proposals VAT Fraud Penalty Anti-avoidance Place of supply Cross border rulings Pilot programme – extended to September 2018 18 participating countries including UK, Italy, Ireland and the Netherlands Notable absentees: Austria and Germany As at July 2016 18 separate requests - details available from European Commission website VAT Action Plan One stop shop Destination principal Simplifications for SMEs VAT Fraud Penalty Legislation aimed at MTIC but could have wider impact (mission creep) Anti-avoidance Online market places Place of Supply Insurance repair services – use and enjoyment

Contact Details Nancy Cruickshanks Shipleys LLP E: vat@shipleys.com T: +44 (0) 20 73 12 65 26 Claire Taylor Simply VAT E: claire.taylor@simplyvat.com T: +44 (0) 1273 634 594

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