1. Brexit: VAT & Customs Duties
Smart decisions. Lasting value.
Brexit: VAT & Customs Duties

2. Agenda Brexit Unknowns Current Position Possible Models Key Risks
“No Remorse” Actions

3. Brexit Unknowns EU caselawand rights
Import tariffs and admin procedures
Future trade model
EU VAT registration and refund system
Use of Simplifications
Transitional period

4. Brexit Unknowns
The lack of clarity has led most businesses to take a “wait and see” approach. Our recent survey following our webinar revealed that:
80% have taken no steps
Only 4% had made practical changes
The biggest worries were:
Regulatory change (22%)
Availability of staff (22%)
Delays at border (21%)
Systems & process change (16%)
However business are now waking up and taking active steps to mitigate the possibility of “no-deal”.

5. Current Position
VAT
VAT administration is easier when trading as a member of the EU with other member states.
EU movements do not require the physical payment of VAT on acquisition whereas imports from outside the EU do.
Record keeping requirements for imports and exports are different and more extensive than for EU transactions and are governed by UK law and not EU principles.
EU law gives taxpayers certain rights which cannot be infringed by domestic legislation
VAT rates and exemptions are constrained by EU Directives – this will not be the case should the UK leave the EU.
Duty
EU movements do not attract customs duty, whereas imports from the rest of the world do.
Once goods are entered into free circulation they can be moved duty free around the EU.
Government has issued a number of guidance papers to manage a no-deal scenario
It remains unclear whether the UK will be part of a customs union with the EU
The treatment of UK companies if outside the EU on 29th March is also unclear

6. Potential trading models – the original ideas1
Part of the EEA
Tariffs apply
Retain access to single market,
But at a price
e.g. Norway 2
Negotiated bilateral agreement
Tariffs apply
Limited access to the single market, at a price
e.g. Switzerland 3
Advanced free trade agreement
Tariffs apply
Reduced access to single market (goods only)
Must accept EU rules
e.g. Canada 4
Fall back option
Tariffs apply
No preferential access to single market
53 new trade agreements to negotiate
China?

7. Potential trading models – possible reality?
The two easements for trading with the EU can be broadly summarised as follows:
VAT – access to the Single Market (may require acceptance of freedom of movement).
Duty – single customs area (may not be possible to agree trade deals with non-EU countries).
It appears increasingly likely that one or both of these easements will not be available following the UK’s exits from the EU if a deal close to the current Government position is passed, or if the UK leaves with no-deal.
As such businesses are now considering what steps they should take to protect the integrity of the supply chains from 29th March. A clear move from a “wait and see” to a “just in case” approach.

8. Supply Chain Disruption
Key risks
Employees
Increased Tax Burden
Supply Chain Disruption
Goods held at port.
Payment arrangements.
Double charge to duty
Increased valuations for duty
Profits in different jurisdictions
Withholding taxes
Future needs
Concerns of EU nationals

9. “No remorse” actions Supply Chain Tax impact Employees
Incorporate EU company and assess the impact on corporate group and infrastructure
Open overseas bank account
Apply for AEO/”trusted trader” status
Increase inventory held in key EU locations
Consider appointing a fiscal representative in the EU countries of importation and registering for VAT
Tax impact
Consider impact of increased sales price from UK to EU for duty purposes where UK is currently a conduit for sales from outside the EU to countries in the EU.
Consider use of customs warehouse, a duty deferment scheme, and other simplifications such as Inward Processing Relief (IPR)
Review and understand what EU VAT reliefs and simplifications you currently rely on
Consider whether withholding taxes could be an issue post Brexit and consider scope to prepay
Employees
Review the workforce requirements to support your business plan
Consider support to EU nationals in your workforce

10. Questions?

11. Keri Pay, VAT Partner
Office: +44 (0)
Mobile: +44 (0)