From 1st January 2021, the transition period with the European Union (EU) will end, and the United Kingdom (UK) will operate a full, external border as a sovereign nation.
This means that controls will be placed on the movement of goods between the UK and the EU.
The UK Government will implement full border controls on imports coming into the UK from the EU.
Recognising the impact of coronavirus on businesses’ ability to prepare, the UK Government has taken the decision to introduce the new border controls in three stages up until 1 July 2021.
The stages are:
For January 2021, you must:
You do not need to
For April 2021, you must:
You do not need to-
If you are not importing Products of Animal Origin or a regulated plant, you do not need to make any changes from January 2021 requirements.
From July 2021, you must-
DEFERRING PAYMENT OF VAT AND DUTIES
VAT - Postponed VAT Accounting
HMRC has announced that from 1st January 2021, goods imported by UK VAT registered businesses from the EU, as well as third countries, will be able to account for import VAT on their VAT return. This will give importers a cash flow benefit as import VAT will not have to be paid immediately to clear the goods through Customs.
Import VAT can be accounted for on the importer’s VAT return if:
This procedure is known as “Postponed VAT Accounting”.
UK importers will be able to access an online monthly statement which they can download and keep for their records. This statement will show the total import VAT postponed for the previous month which should be included on the VAT return. Owing to postponed VAT accounting, there will be changes to the way UK importers complete boxes on their VAT returns.
With regards to Duties, after 1st January 2021, the Duty Deferment Account (DDA) can be used to defer payment of tax. A DDA allows holders to delay customs duty, excise duty and import duty, to be paid once a month rather than on individual consignments. If traders import goods regularly, they can apply for a “duty deferment account” to delay paying most customs or tax charges, for example: customs duty, excise duties and import VAT (non-VAT registered entities) up to £10,000 a month, for higher amount a bank guarantee will be required. Traders can also apply to delay paying duties on goods released from an excise warehouse.
A duty deferment account let them make one payment a month through Direct Debit instead of paying for individual consignments.
Traders can apply for a duty deferment account if they are an importer or someone who represents importers or if they and their businesses are established in the UK.
To date it seems non-resident traders cannot benefit from the above scheme unless they have a subsidiary or permanent establishment in the UK.
If the application is approved, traders will get a deferment approval number together with the agreed amount of deferral limit. They can give someone authority to use your duty approval number in their duty deferment application, such as your freight forwarder or courier.
The EC acknowledges that the changes to the VAT Directive will require some IT adjustment. Therefore, the EC is encouraging all member states to agree to the proposal so that it can be implemented before the end of the transitional period.
VAT RULES FOR NOTHERN IRELAND
With regards to VAT rules for Northern Ireland, with effect from 1st January 2021, the European Commission (“EC”) has recently published proposed changes to the EU VAT rules in preparation for the end of the transitional period with the UK.
The proposal introduces a special identification number for businesses in Northern Ireland, so that EU VAT provisions can be applied to goods traded in Northern Ireland. In effect, when the transitional period expires on 31 December 2020, goods sold and transported from Northern Ireland to the EU (and vice versa) will be treated as if they were cross-border supplies of goods within the EU.
There are a number of changes to the UK VAT system that are being introduced on 1st January 2021 specifically targeting ecommerce businesses and how they account for VAT. While some of these changes are a direct result of the UK leaving the EU, others (targeting ecommerce businesses) were planned by the EU before BREXIT.
Due to the coronavirus pandemic, the EU has postponed its changes to ecommerce VAT until 1st July 2021, while the UK has not. This difference in EU/UK VAT approach causes an additional complication for 6 months.
To follow the four major changes that will be introduced to the UK VAT regime on 1st January 2021:
EU businesses that sell goods from the EU directly to UK consumers will need to register for UK VAT.
Note: From 1st July 2021 the VAT MOSS scheme will be expanded from digital products to include physical products. At this point a UK business will be able to make distance sales into the EU via the scheme without needing to directly register in each EU jurisdiction.
Laggan & Associates Ltd