EU Exit tax update
Tax Treatment during the Transitional Period
UK Global Tariff published - May 2020
The government has announced the UK’s new tariff regime, the UK Global Tariff (UKGT), which will replace the EU tariff at the end of the Transition Period. It states that the UKGT is tailored to the needs of the UK economy, making it easier and cheaper for businesses to import goods from overseas. It will reduce many tariffs to nil, for example, on dishwashers, garden shears and Christmas trees, and round down many more.
However, it should be noted that, unless a trade deal is reached, importing goods from the EU will become more administratively complex and potentially more expensive. For example, imports of orange juice from Spain will be subject to duty at 30% under UKGT, aubergines from France duty at 12%, and cut flowers from the Netherlands duty at 8%.
Publication of the UKGT allows businesses to forecast the duty implications of post-Transition Period trade somewhat more accurately.
The Tax Team will be providing more detailed analysis in due course. In the meantime, you can use the government UK Global Tariff Tool to check the tariffs that will apply to goods you import from 1 January 2021.
Transactions since January 2020
Under the transitional arrangements valid from February to December 2020, there are no effective changes to taxation treatment despite Britain's departure from the EU.
Transactions should continue to be entered into as at present, the transitional arrangements maintain the current status quo. When it becomes necessary under the ongoing negotiations, Oracle system changes will be implemented to correctly account for import VAT and duties. The Tax Team continue to monitor the situation and develop training plans for when detailed post-December 2020 legislation is published.
UK VAT (after December 2020)
Current government guidance is clear that:
- The UK will continue to have its own VAT system
- VAT rules relating to domestic (within the UK) transactions will continue to apply as currently
- The aim will be to keep VAT procedures "as close as possible to what they are now"
- There will be "some specific changes" to rules and procedures to transactions between the UK and EU member states
a) VAT on cross border services (the EU and outside the EU)
Assuming the UK leaves the Customs Union, then the following will apply:
- Buying in services from outside the UK
This will remain essentially unchanged, reverse charge will continue to be accounted for on services bought from outside the UK.
- Supplying services outside the UK
Services sold to businesses outside the UK will continue to be outside the scope of UK VAT and therefore no UK VAT will be charged.
b) VAT on Goods (the EU and outside the EU)
- Supplying goods outside the UK
This will be classed as an export and zero rating can be applied. This means VAT will be charged at 0% and we can recover the input tax which relates to this supply. Please note HMRC require you to keep evidence that the goods have left the UK. Import VAT and duty will be due at the EU border. If you export, please contact the tax team.
- Importing goods (buying in goods outside the UK)
For the movement of goods across borders, you will need to use the University's EORI number: GB 125 5067 30 065.
Current government guidance is that existing rules on importing from non-EU member states will apply to importing from EU member states.
There is the advantage of delaying the accounting for VAT on the VAT return, rather than having to pay it at the border. This will require liaison with your freight forwarders. Please remember our preferred suppliers are Davies International, RM Couriers and DHL. See Purchasing for more information.
We are working with Oracle support to implement changes to how we account for import VAT and duties. The key to ensuring compliance is good documentation.
Please ensure your freight forwarder provides copies of the C88/E2 forms to email@example.com.
This information will be updated as things change
We are arranging training in the new procedures; there will be courses available when the UK's future arrangement with the European Union is clarified.