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23rd September 2021Brexit: Tips and Recommendations for Charities
We are now nine months into the UK’s trading life outside the European Union (EU). Leaving the EU has resulted in some major changes particularly in respect of VAT and Customs and the wider charity sector has struggled more than some sectors in adapting to the changes. Outlined below are the changes and what charities should be doing to mitigate those changes.
What has changed?
Goods coming into the UK from the EU are now treated as imports and movements of goods from the UK into the EU are exports. Customs declarations are required for imports and exports and there may be checks on the goods at the border;
We have stepped back in time and duty might be payable on goods imported from or exported to the EU. The Free Trade Agreement provides for zero tariffs and quotas on goods that originate in the UK or EU;
Businesses have the option to use postponed VAT accounting to account for import VAT on goods coming into the UK from the EU and rest of world. Postponed VAT accounting does not apply to goods used for non-business purposes;
Low Value Consignment Relief which provided relief from import VAT on consignments of goods £15 or less is no longer available. Instead new arrangements are in place which applies to overseas sellers for goods to customers in Great Britain;
The Northern Ireland Protocol has made selling goods into Northern Ireland subject to additional compliance costs, albeit some is government funded!;
From 1 July 2021, the EU has introduced new VAT e-commerce rules which require all commercial goods imported into the EU from a third country to be subject to VAT.
Services are also impacted. Although the majority of the VAT rules for services are largely the same as they were prior to 1 January 2021, B2C services of professional, technical, financial or other intangible nature made to private customers outside the UK are outside the scope of VAT. HMRC have provided examples of such services in section 12 of Notice 741A.
From 1 January 2021, the UK is no longer a part of the Union MOSS scheme which means that any business registered in the UK for MOSS will either have to re-register for MOSS in an EU member state, or register for VAT in each member state supplies are made in.
What should Charities be doing to mitigate the above?
Use all import VAT available reliefs in areas such as food/medicines/goods to be sold at charitable events/ free of charge office equipment (there are more!) If you have paid VAT and are unable to recover, make a claim for reimbursement from HMRC!
Review rules of origin in light of the Free Trade Agreement. Ask questions of EU suppliers as to whether goods being purchased qualify for duty free importation into the UK
Where duty is payable on goods imported from the EU, review the HS code. Is it right? Can the product be classified in a different HS code with a lower duty rate
If you are re-importing goods that previously left the UK, consider the application of returned goods relief. There is a 3 year window.
If you are supplying goods into Northern Ireland, ensure that you are conversant with the Trader Support Service and the UK Trader Scheme
If you have B2C sales into the EU under €150, you will need to register in one EU member state. At HW Fisher, we have a very attractive Dutch option at our disposal!