After Brexit – has anything changed?

March 26, 2021

Alison Birch, VAT partner at UK firm Mitchell Charlesworth, looks at where the UK has got to, 3 months after Brexit.

We are 3 months post Brexit – how is it going?

The dust is starting to settle.  It has been a shock to many businesses (and the consumers that have been stung for additional charges they were not expecting) as I think the theory of the Brexit changes were a bit different to the reality.

What were the main challenges?

In the first few weeks we received a number of queries regarding duty on UK/EU transactions due to a lack of understanding of the origin rules and that this is not necessarily where the goods start their journey.  Some businesses were importing goods from a 3rd country to the UK (and paying duty) and when they were selling to EU customers, they didn’t realise that duty was payable again.  As a result, they were less competitive as duty was essentially due twice on the same product.  The same will apply to EU businesses moving goods to the UK that are not of EU origin so they may want to consider the use of customs warehousing in their initial country of importation if they know some of their goods are coming to the UK.

From an administrative perspective, there have been delays with paperwork, postponed accounting references not being added to the import declaration, confusion reconciling invoices with the various paperwork (or lack of) and rather lengthy delays in UK VAT registrations.  However, the UK tax authorities have now caught up with the backlog and things are running more smoothly.

Is there any good news?

There have been some positives.  The introduction of the marketplace changes means that non-UK businesses that were registered for VAT in the UK before 1 January may no longer be required to if they sell through a marketplace.  This is because the marketplace may become responsible for the VAT on the onward sale.   Non-UK businesses that do not use a marketplace but sell to UK customers are able to improve the buying experience for customers due to new rules for imports under £135.  If the value of the consignment is under £135, instead of making the customer responsible for the import and paying additional charges (which may mean they send the product back), the vendor registers for UK VAT and charges this VAT to the customer.  There is no import VAT in this scenario, just VAT on the sale which is administratively much easier and results in the same amount of VAT being paid to HMRC.

What are the new freeports that have been announced?

We have limited information at the moment, but it is expected they will operate like a customs warehouse.  Therefore, although they are physically in the UK, they are outside the VAT and customs area so goods should be able to be moved in and out of the Freeports, to and from locations around the world, free of any import obligations.  It should also be possible to sell goods without VAT in a Freeport.

About Alison Birch

Alison has worked in VAT for over 20 years, both in professional practice and industry.  She has dealt with VAT issues in a variety of sectors including retail, media, manufacturing and healthcare.   Alison has also spent time overseas assisting a large business restructure its global supply chain and has recently been assisting businesses with the introduction of VAT in the Middle East.

Alison is a member of the firm’s Making Tax Digital team which offers businesses practical guidance on how to manage the forthcoming changes to the tax system.

Alison joined the firm as senior manager in 2016 and was promoted to partner in 2018.  Alison is also a qualified homeopath and treats patients in her free time. Click here to contact Alison