BREXIT - VAT & Customs

Transcription

1 BREXIT - VAT & Customs Maria McConnell - VAT Director William Wallace - VAT Manager

2 1 AGENDA Background Current arrangements UK Government proposal Chequers Draft withdrawal agreement No Deal! Planning Practical Considerations Resources Questions?

3 2 Background Brexit Timeline of events 23 June referendum held on EU Membership, David Cameron resigns 13 July Theresa May becomes Prime Minister 29 March Article 50 triggered 8 June 2017 General election, Mrs May stays as PM 26 June 2017 formal negotiations begin between UK and EU 15 December nd phase of negotiations, agreement on divorce bill 19 March 2018 Agreement on transitional period 12 July 2018 Chequers plan 23 August 2018 No deal guidance issued 14 November 2018 Draft withdrawal agreement between EU and UK negotiators 29 March 2019 Brexit at 23:00GMT? 31 December 2020 Transitional period due to end.

4 3 UK Imports 2016 European Free Trade Association 5% Rest of the World 243b 41% EU 318b 54% REST OF THE WORLD USA 66.3bn 27% Other 114.1bn 36% EU Germany 75.1bn 24% Other 122.9bn 51% Japan 11.5bn 5% China 42.3bn 17% Ireland 20.8bn 6% Spain 28bn 9% France 37.6bn 12% Netherlands 42.4bn 13%

5 4 UK Exports 2016 Other % REST OF THE WORLD Japan 12.5b 4% European Free Trade Association 27.5b 5% China 16.8b 6% Rest of the World 284.1b 52% USA 99.6b 35% Residual Gulf Arabian Countries 17.1b 6% Other 77.9bn 33% Italy 17.3bn 8% Ireland 26.7bn 11% EU 235.8b 43% EU Germany 49.1bn 21% France 33.8bn 14% Netherlands 31.0bn 13%

6 5 Scottish Imports & Exports IMPORTS STATISTICS SCOTLAND 2017 EXPORT STATISTICS SCOTLAND 2017 Rest of the World 8.5b 48% EU 9.1b 52% Rest of the World 14.7bn 51% EU 14bn 49% House of Commons Briefing Paper, Number 7851, 31 July 2018, Statistics on UK-EU trade

7 6 Scottish Imports & Exports Scottish exports to Non-EU countries increased by 565 million (3.4 per cent) to 17.1 billion in Scottish exports to EU countries decreased by 105 million (0.8 per cent) to 12.7 billion in Within the EU, the Netherlands ( 2.1 billion) was the largest market, followed by France ( 2.0 billion) and Germany ( 1.9 billion).

8 7 Current Arrangements Customs - General The UK is part of the EU Single Market & Customs Union free circulation goods move freely around the EU No tariffs or customs declarations required EMCS used to control movement of duty suspended excise goods EU is one trading block Duty rates and quotas set at EU level Preferential agreements can help facilitate trade due EU Customs legislation UCC introduced 1 May 2016

9 8 Current Arrangements Customs - third country imports Customs declaration required Possible licence requirements Import duty dependent on product and country Duty is usually an absolute cost Import VAT due at time of import reclaimable under normal input tax rules Various customs regimes to benefit EU traders

10 9 Current Arrangements

11 10 Current Arrangements Customs third country exports Export declaration required Export licence required? Discharge duty liability on any customs regime used Customs requirements at receiving country

12 11 Current Arrangements VAT - General EU has common VAT system EU VAT law implemented in UK via VAT legislation (VATA 1994) Very similar VAT rules across EU, some variations, with scope to apply country specific rules CJEU holds legal authority over majority of VAT rules Single Market helps to facilitate cross-border trade VAT accounted for in the EU (working towards destination principle)

13 12 Current Arrangements VAT - EU Movement of goods B2B: VAT not charged on B2B cross-border movements of goods Administrative requirements such as, correct invoicing, EC Sales Lists and Intrastat VAT accounted for in the EU, although often a paper exercise Prevents the need to recover VAT from relevant Member State Minimal Impact on cashflow B2C: UK VAT due on B2C distance sales unless distance sales threshold breached or goods located in country of sale VAT registration & accounting required in relevant EU country

14 13 Current Arrangements VAT third country imports & exports Third Country imports: Import VAT due at time of import Reclaimable on VAT return via C79 Certificate Cashflow? Third country exports: No VAT zero-rated Evidence should be retained Still recorded on VAT return No ECSL or Intrastat

15 14 Current Arrangements VAT Cross-border services B2B: Generally no VAT charged on cross-border B2B services Evidence customer is receiving service for business purposes Similar to goods customer accounts for VAT using Reverse Charge Can be required to register in other EU country (land-related) B2C: Generally supplier accounts for VAT, particularly when consumer located in EU Digital sales taxed where consumer is located. Possible overseas registrations OECD provide international guidelines for VAT on services, significant changes unlikely

16 15 Current Arrangements VAT - IT Mini One Stop Shop (MOSS) Allows businesses to account for VAT in one EU country for B2C digital sales across the EU VAT refunds system Submit electronic VAT refund claims (get in quick?) VIES Check validity of VAT Registration numbers VAT the future? VAT very likely to continue in the UK high earner for treasury Domestic VAT rules to stay the same initially post-brexit More flexibility for UK in setting rates? Potential autonomy for devolved administrations?

17 16 Initial Proposal Chequers UK to leave the Customs Union & Single Market and therefore the EU VAT system Transitional period until December 2020 UK able to seek own trade agreements New customs arrangement with EU Frictionless access at border to each other s market for goods Establish free trade area for goods no tariffs or quotas Work towards Facilitated Customs Arrangement Import duty paid according to destination market Repayment mechanism for overpaid import VAT No customs processes required between UK and EU including customs declarations Other proposed trade facilitation mechanisms: Agree mutual recognition of AEO status Introduce simplifications, including self-assessment and aggregate customs declarations Make simplified procedures easier to access

18 17 Latest Position Draft Withdrawal agreement 14 November page Draft Withdrawal agreement Mainly focuses on transitional/implementation period Protocol for Backstop for NI Political declaration accompanied WA, setting out framework for future relationship WA Transitional phase Transitional phase until 31 December 2020 can be extended (once ) if agreed by joint committee before 1 July 2020 (possibly to 31 December 2022?) UK would continue to operate in Single Market & Customs union VAT & Excise would continue under current rules during transitional period No customs requirements between UK and EU Bound by EU law and CJEU but no representation in EU institutions or governance Rules for transactions or movements not complete before end of transitional phase

19 18 Latest Position Draft Withdrawal agreement UK defaults to being in a customs union with EU (the Backstop) Customs Union to form basis of new trade agreement between UK and EU Concerns this could limit ability to negotiate future trade deals North Ireland Backstop kicks in if transition ends and no new agreement reached: Single EU-UK customs territory (could this be like Turkey/EU CU?) EU s Customs Code to apply in Northern Ireland to avoid hard border NI remains aligned to Single Market rules NI VAT rules on goods to be aligned to EU Could movement certificates or other declarations be required to demonstrate free circulation status?

20 19 Latest Position Future UK/EU trading relationship? Political declaration accompanied draft WA, setting out framework for future relationship Initially 7 page document, although now expanded to 26 pages: Work towards new arrangement to replace backstop Comprehensive arrangements creating free trade area using deep customs cooperation with provisions to ensure level playing field and fair competition Zero tariffs, fees, charges or quantities restrictions, ambitious customs arrangements that build and improve on the single customs territory provided for in the WA Avoid need for checks on rules of origin Mutual recognition of trusted trader programmes (AEO) Use of alignment, cooperation and technology to reduce checks and controls

21 20 Latest Position What next? If draft withdrawal agreement ratified: UK leaves the EU on 29 March 2019 Moves into transitional phase If draft withdrawal agreement not ratified: Renegotiate terms and/or extend Article 50? No deal? No Brexit? If no deal then UK would move onto WTO rules

22 21 No Trade Agreements? WTO rules: Default position if no trade agreements with EU and non-eu countries UK is member of WTO in its own right, although need to re-establish autonomy from EU Agree schedules for tariffs on goods could mirror current EU rates Must apply most favoured nation (MFN) rules Cannot differentiate between EU and other countries (e.g. USA), unless trade agreements in place UK could lower/waive tariffs, although would have to do this across the board

23 22 No Deal overview 11pm 29 March 2019 UK Leaves EU EU becomes a third country for trading purposes WTO rules will apply No longer Intra EU movement of goods using EMCS (Excise Movement & Control System) UK traders will no longer have access to EU IT systems

24 23 No Deal Customs Before importing need to: Register for an EORI number Check INCOTERMS as importer Decide how to submit customs declarations i.e. via: new software and authorisations from HMRC; or use brokers, forwarders or logistics Classify goods using the tariff If UK has no trade deals in place, WTO rules apply No longer intra EU movement of good using EMCS

25 24 No Deal VAT & Customs When importing need to: Provide EORI number; Provide goods classification number; Provide Customs Procedure Code (CPC) May require an import licence for specific goods; Submit and import declaration via software or carrier; Pay VAT and import duties (though VAT may be postponed) unless utilising suspension arrangements;

26 25 No Deal VAT Import of goods from the EU Postponed accounting for import VAT how will it work? Will apply to current EU and non-eu trade after 29 March Import VAT will be accounted for via VAT returns, so no need to pay on entry to UK. Customs duty declaration and duty payment still required on entry.

27 26 No Deal Customs When exporting to the EU: Provide EORI number ; Consider INCOTERMS re new exporter status; Decide how to submit export declarations i.e. via: o new software and authorisations from HMRC; or o use brokers, forwarders or logistics; May need an export licence;

28 27 No Deal VAT Export of goods to EU businesses Sales to EU business will be treated as exports and zero rated in the UK, subject to retention of evidence. EC sales lists & Intrastat reporting no longer required EU countries may impose import VAT and Customs duties on goods entering the country. UK businesses which store goods in EU member states will still be required to register and account for VAT there subject to local rules.

29 28 No Deal VAT Export of goods to EU consumers Distance selling arrangements will no longer apply. Sales from UK to EU consumers will be zero rated in the UK EU member states will treat goods from UK in the same manner as goods arriving from other non-eu countries. VAT and associated customs duties may apply.

30 29 No Deal VAT VAT on goods sent to UK as parcels Low value consignment relief (LVCR) not extended. All goods sent as parcels by overseas businesses subject to VAT. Goods valued up to 135 VAT to be collected direct from overseas businesses. VAT to be charged at the point of purchase and seller to register with HMRC digital service to account for VAT online. Provided with Unique Identifier which will accompany parcels. Goods more the 135 sent as parcels VAT collected from UK recipients in line with current procedures for non-eu.

31 30 No Deal VAT - Services Services to and from the EU Place of supply rules will remain broadly the same Digital services to consumers in the EU will be accounted for under the non-union MOSS scheme TOMS information is awaited on any proposed changes Insurance and Financial Services input tax rules may change

32 31 No Deal VAT Northern Ireland No clear guidance as yet provided though the Government is keen to work to an agreeable solution for all parties. Postponed accounting for VAT will ease cross border VAT transactions Unclear how Customs entry checks and duty payments will be policed without a hard border.

33 32 Contingency Plans Customs procedures to consider: Duty Deferment Scheme Customs warehousing; Inward processing; Temporary admission; CFSP Customs Freight Simplified Procedures Authorised use; AEO Authorised Economic Operator

34 33 Contingency Plans Duty Deferment Scheme Allows deferment of payment of customs duty, excise duty, import VAT and other levies and charges for an average of 30 Days Use of Deferment Approval Number (DAN) means payment is not required each time goods are imported; Calendar Month basis payment due by 15 th of the following month by direct debit Excise duty period is 15 th of the month to 14 th of the month (30 days credit) Security guarantee required from a bank, insurance company or building society Simplified Import VAT Accounting (SIVA)- reduces level of guarantee required in respect of import VAT.

35 34 Contingency Plans Customs Freight Simplified Procedures (CFSP) Two types of CFSP authorisation: Simplified Declaration Procedure (SDP) Release goods at frontier to customs procedure Entry in Declarant s Records (EIDR) (formerly known as Local Clearance Procedure) Move goods from frontier to temporary storage, then release to customs procedure Submission of minimal data to clear goods at the frontier Faster release of goods from customs at port or airport, or at authorised inland locations (subject to anti-smuggling checks) Potential cashflow benefits duty and VAT not paid until supplementary declaration submitted

36 35 Contingency Plans Authorised Economic Operator AEO A recognised quality mark for international supply chains Anyone in the supply chain involved with Customs related activities can apply Declares the business as reliable in financial and Customs terms, as well as for security and safety standards 2 types of authorisation: Security and Safety (AEOS) customs compliance, record keeping standards, financial solvency & appropriate record keeping standards; Customs simplification (AEOC) as above plus standards of competence or professional qualifications related to the specific activity carried out

37 36 Contingency Plans Authorised Economic Operator AEO Benefits An industry kite mark Lower risk score within Customs risk management systems = reduced physical and documentary checks Consignments can be fast tracked and given priority over non AEO Move goods in temporary storage between member states AEOC 70% reduction in deferment account guarantee - AEOC Speedier applications for Customs Freight Simplified Procedure (CFSP) or National Export System (NES) - AEOC

38 37 Contingency Plans Customs Warehousing Allows businesses to store goods with duty or import VAT payments suspended. Also goods which arrive where licences or paperwork is delayed, or; Wish to use another customs procedure such as inward processing 2 Types of warehouse Type R public warehouse - operated by a warehouse keeper to store other trader s goods Type U private warehouse operated by an individual business who acts as warehouse keeper and depositor for the facility However, there are a limited number of warehouses in the UK, many of which will require reauthorisation in light of Brexit.

39 38 Contingency Plans Inward Processing Relief Provides relief form customs duty and import VAT on goods that are imported from outside the EU to be processed, then re-exported or released to free circulation in the EU. Excise Duty can also be suspended under IP Authorisation is required full or by declaration Time limits apply 1 year max under full/ 6 months under declaration Record keeping requirements Authorisation holder is responsible for all duties, regardless of ownership

40 39 Contingency Plans Temporary admission (TA) Provided goods are not altered whilst in the UK there should be no requirement to pay duty or VAT. Duty guarantee will be required Can apply to: Samples professional equipment such as cameras and sound equipment Goods for educational or scientific purposes Goods for auction, exhibition or demonstration Eligibility for TA is based on the type of goods and their intended use before leaving the UK Goods can remain in the UK for up to 2 years

41 40 Contingency Plans End use Relief - Only applies to Customs Duty Reduced or zero rate of duty applies to certain goods used for specific purposes in a set time period Eligible good include: shipwork goods aircraft and parts hydrocarbon oil marine propulsion engines military equipment fish Cheese / casein (used in the cheese industry)

42 41 Practical Considerations Contractual agreements with supply chain partners EU & UK terms? Contractual terms can they be met at the same cost and in the same time frame? Review supply chain where are goods sourced by your suppliers? Potential costs to implement contingency plans might include: Additional staff plus training required for new and existing; Implementation of new systems and procedures; Freight agent costs or increased deferment account charges; Warehousing costs

43 42 Useful Resources UK Government - Ongoing Brexit updates No deal technical guidance No deal Partnership pack PrepareforBrexit.scot - Provided by Scottish Enterprise Brexit self-assessment, toolkit and checklist

44 43 Summary What should you do? Understand the Brexit changes that might affect your business Review Plan factors that might impact productivity or supply chains e.g. rules of origin, product safety standards, quotas how can you mitigate potential costs or significant changes to the supply chain? Implement upgrade or install technology solutions which will make it easier to comply with changes to Customs procedures; Consider applying for CFSP or AEO status Utilise Duty Deferment Scheme

45 BREXIT - HR Considerations Louise McCosh - HR Director

46 45 What we will cover Anticipated Requirements for EU Workers Planning for Potential Skills Shortages Additional Employment Considerations

47 46 Anticipated Requirements for EU Workers Current Position Proposed Changes Timescales

48 47 Current Position How many EU citizens working currently working in UK? EU Nationals, Swiss and EEA nationals (Norway, Iceland and Leichtenstein) all have right to reside and work in UK for more than 3 months if qualified person What is a qualified person? Currently no visa requirements

49 48 Proposed Changes EU Settlement Scheme - 5 years or more = Settled Status - Less than 5 years = Pre-Settled Status Family Members Digital System Applications Irish Citizens Implications of no deal Brexit

50 49 Timescales EU Settlement Scheme Timescales Pilot Scheme Implementation Period Application Deadline Now to 29 March March 2019 to 31 December June 2021

51 50 Planning for Skills Shortages Audit your current structure Supporting EU Workers Becoming an employer of choice

52 51 Audit your current structure What is the split of EU to UK workers in your current workforce? How reliant are you on EU workers? What are your likely requirements going to be in the foreseeable future?

53 52 Supporting EU workers Promptly providing information for applications Publicising Home Office guidance Paying for settlement applications - 65 per adult per child

54 53 Becoming an employer of choice Recruitment Competitive Packages Organisational Culture

55 54 Additional Employment Considerations Employer Right to Work Checks Potential Downturn in Work Employment Law

56 55 Recap Anticipated Requirements for EU Workers Planning for Potential Skills Shortages Additional Employment Considerations

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