The answers to your questions about the impact of the UK-EU trade agreement. Our team have put together Frequently Asked Questions to help you and your business.
Frequently asked questions
- Do I need to appoint a Customs agent?
Businesses that are not established in the UK MUST appoint someone who is based in the UK to deal with customs on their behalf i.e. an agent or freight forwarder. For businesses established in the UK, it is technically possible to deal with Customs clearances and related matters themselves. However, due to the specialist nature of the software needed, it is usually preferable to appoint an agent or freight forwarder to act on your behalf. If you need to appoint a Customs agent to deal with import and exports matters on your behalf, please click here for more details. We are unable to recommend anyone in particular.
- Do I need a deferment account for import VAT?
Currently for imports from outside the EU, it is possible to apply for a deferment account so that import duty and VAT is not payable at the border but by direct debit at a later date. Import VAT now can be accounted for on the VAT return in most circumstances, meaning a cash flow benefit as import VAT doesn’t need to be paid before reclaiming it. There is a slightly simplified process to apply for a deferment account for goods being imported to GB which can be used for any import duty. You can also use your agent’s deferment account where they offer this service. The rules for transferring goods into and through Northern Ireland are a little more complicated. If you plan to move goods between Northern Ireland and Great Britain, or bring goods into Northern Ireland from outside the UK, you can sign up for the free Trader Support Service, which can be found on the government website.
- What is the treatment for sales of goods in Ireland?
As a result of the Northern Ireland Protocol, Northern Ireland (NI) have a special dual status, now a deal has been reached, to avoid a hard border. NI is still part of the UK VAT system however, movements of goods from NI to GB and vice versa are now classed as imports and exports with special Customs procedures to simplify matters. Movements of goods between NI and the rest of Ireland/rest of the EU is between EU supplies. The position is complex and if this affects your business, advice should be taken.
- Do I need an EORI number?
Yes, HMRC are automatically issuing GB EORI numbers to all VAT registered import/export businesses. If you haven’t received it, you should apply online at Gov.UK. Businesses also need an EU EORI number if importing into the EU. These are available from the local territory. Mercer & Hole are founder members of The International Accountancy Group (TIAG), through which we can access a global network of likeminded firms and can assist and advise you on regulations in different territories.
- Do I need to set up a subsidiary in the EU? Will EU businesses refuse to do business with a UK company?
This will depend upon several factors, including where you are established, your supply chain and the Incoterms for your goods. Businesses should seek professional advice as every firm will have unique circumstances. Here at Mercer & Hole, we have the international connections and experience, and we are happy to assist you to determine what is best for your company.
- Do I need to register for VAT in an EU country? If so, will I need to appoint a fiscal representative?
Whether you need to register in other countries will depend upon your current supply chain and Incoterms for the supply of the goods. Where an EU VAT registration is needed, most EU countries will require you to appoint a fiscal representative (local agent) who will become responsible for payment of VAT and, as such, will need a bank guarantee or deposit. Simplifications such as Triangulation, are no longer available and often require you to register in another EU country. Again, our overseas colleagues are able to advise you.
- Are cross-border services impacted?
The rules for B2B cross border services haven’t changed and the reverse charge continues to apply. B2C services supplied under EU MOSS (digital services) and financial services have been impacted and advice should be sought. B2C services of a professional, technical or financial nature that would previously been outside the scope of UK VAT when supplied to a customer outside the EU are now also outside the scope of UK VAT when supplied to customers in the EU but outside the UK. In the majority of cases this will NOT mean a requirement to register in the EU either though each individual country’s rules on use and enjoyment should be checked. Please do not hesitate to contact us if either of the above affects you and you would like advice.
- Do I need to continue to submit EC sales lists/Intrastats?
EC sales lists are no longer required. Intrastat declarations are needed for arrivals only.
- Do I still need to quote my EU customers’ VAT numbers on sales invoices?
Sales of goods to EU countries are now zero-rated exports (provided the conditions in HMRC Notice 703 are met). It is no longer necessary to obtain and quote EU VAT numbers for sales of goods. The former distance selling rules have changed impacting both direct sellers and sales via online marketplaces (“OMPs”). OMPs are now responsible for the payment of VAT in certain instances.
- How is tax affected by Brexit?
Certain UK taxes have been impacted now the transition period is over, with major shifts in relation to indirect taxes – such as VAT – which were previously aligned under EU policy (see the other Frequently Asked Questions on VAT.)
The UK already had control of its own direct taxes including income tax, capital gains tax (see below), inheritance tax and corporation tax. This means no instant change in policy, with the next potential revisions announced in the forthcoming Budget, scheduled for Spring 2021.
If you have applied for Settled Status to ensure you have permission to live in the UK, you may wish to consider your tax position. The UK has continued to retain certain existing EU tax directives, for example, HMRC has already announced that the EU “DAC6” cross-border tax reporting is still in place now the transition period is over.
- Will the UK become a tax haven now the transition period is over?
A hefty reduction to UK tax rates after Brexit may appear to be a simple method to entice investment to the UK and many people have predicted that the UK could become a tax haven now the transition period is over. Unlike VAT, the UK already had the ability to set direct tax rates but now, in a post-Brexit world, the UK may be unshackled from the scope of EU legal action into the use of low tax rates as a form of “state aid”. However, the Brexit trade deal says very little about taxation although there is a clear stipulation that the UK must comply with the EU code of conduct regarding taxation, which certainly puts the brakes on the UK aggressively undercutting the EU on taxation and may be unattractive due to the perceived risk of retaliatory measures from the EU. In any event, the financial burden of the COVID-19 pandemic may mean that the Chancellor has little scope to reduce taxes.
The UK corporation tax rate is already globally competitive, and last year (2020), a proposed reduction in the rate from 19% to 17% was withdrawn, which provides an insight that the UK has little appetite to lower the tax rate further for companies and is unlikely to seek to become a tax haven. There are plans for sea, air, and rail ports to bid for ‘Freeport’ status to allow customs tax relief, which some view as effective mini tax havens.
- How has Capital Gains Tax been affected by Brexit?
Whilst nothing is confirmed at this stage, it is widely speculated that there may be an increase in UK Capital Gains Tax (CGT) rates later this year. The existing CGT rates are 20% for higher rate taxpayers or 28% on sales of residential property – far lower than the top rate of income tax at 45%.
There is a spring Budget planned for early this year when increases to CGT rates may be announced, which would either commence from 6 April 2021 or may even be introduced with immediate effect.
- What is the effect on cross-border workers?
Implications for cross-border workers are around social security/national insurance contributions. Previously, there was an overarching reciprocal agreement on NIC, which meant that contributions in one country were recognised in the other EU states meaning there was no need to pay double contributions (similar in operation to double taxation treaties). In addition to the travel restrictions imposed due to the COVID-19 pandemic, for cross-border workers, the regulations now vary according to territory and for UK nationals looking to work in the EU one of the key challenges will be navigating so many new regulations, some of which will be positive, such as the UK-Swiss Mobility Agreement, others less so. Mercer & Hole have a strong network of EU contacts through our membership of The International Accounting Group (TIAG) so please do not hesitate to contact us if this affects you and your business.
- Will Brexit affect my pension?
UK registered pensions operate under rules created in the UK so are not directly affected by Brexit in terms of changes to the rules surrounding them. However, whether the scheme is a defined benefit or defined contribution arrangement does have a potential impact.
With defined benefit schemes, such as those referred to as ‘final salary’ or ’career average revalued earnings’ schemes, there is a promise of a certain level of benefit. The responsibility to provide this benefit lies with the scheme and usually a sponsoring employer.
Defined contributions schemes – such as most personal pensions – are effectively tax-efficient savings plans. With these arrangements the ultimate benefit depends upon how much is contributed and the performance of the underlying investments. As such, stock market volatility due to the impact of the COVID-19 pandemic and a post-Brexit world could have an impact of the value of these funds. Whether that is a positive or negative impact will very much depend on the types of investment funds and where they are investing.
- Will Brexit affect my private pension?
A private pension is highly likely to be a defined contribution arrangement, as outlined above. The risks that Brexit exposes it to are, therefore, the same as outlined.
Given the huge range of investment funds and strategies in the market, it not possible to give the same, concise answer of the potential impact of Brexit for everyone. If you do have concerns about your own retirement plans and what Brexit could mean for them, please speak to Michael Lapham, Director of Financial Planning.
- Do I need to register for VAT in an EU country? If so, will I need to appoint a fiscal representative?
Whether you need to register in other countries will depend upon your current supply chain and Incoterms for the supply of the goods. Where an EU VAT registration is needed, most EU countries will require you to appoint a fiscal representative (local agent) who will become responsible for payment of VAT and, as such, will need a bank guarantee or deposit. Again, our overseas colleagues will be able to advise you on EU registration requirements.
- What will happen to triangulation arrangements?
Triangulation will no longer be available for movements to or from the UK (except Northern Ireland). Any UK Company that moves goods between EU member states and makes sales from within the EU will be required to register for VAT in at least one EU country (see above). Once registered in one EU country triangulation can be applied to EU supplies. This will then not affect the UK registration as the goods will not enter the UK. If you are trading through Northern Ireland the rules are slightly different, so please get in touch and we can advise on the specifics of your trading arrangements.
- We are here to help
We will also continue to address the issues that arise and will publish frequently asked questions (FAQs) on these pages. Please do not hesitate to contact us if you have any further enquiries; we are here to help you.