FINANCIAL UPDATE\\\ Eurozone puts industry under pressure


The financial crisis may be four years old, but the effects are still being the felt across the globe nearly four years later, writes Steven Fifer of Caxton FX. The UK is in recession, growth forecasts have been revised down and bank lending to businesses is being restricted. What’s also not helping the UK is the fact that the Eurozone is Britain’s largest trading partner


and problems there are weighing heavily on the business climate this side of the Channel. But while trading conditions


are tough, the UK is going to have to continue trading with their European neighbours in order to climb out of this hole, as well as exploring markets further abroad, and the freight industry will have an important role to play in this. However, doing business with


Get ready for VAT changes


Changes to the VAT rules could have implications for some transport operators, reports Keith Mason, tax partner in accountancy firm Barnes Roffe. Worriers like me might not be


looking forward to December and the reduction to zero of the VAT registration threshold for overseas businesses supplying services in the UK. I feared this might cause non-UK hauliers difficulty. However, on closer inspection, that seems unfounded. Analysing the place of supply


rules and the inverse charging provisions, we can establish that: • A business to business supply


from one EU country to another EU country will be supplied in the customer’s place of business, but the VAT liability is subject to the reverse charge so that the transport company should not, by means of such a transfer into the UK alone, become liable to be VAT registered in the UK; • A business to non business


supply (again within the EU) is deemed to occur where the transport begins. So for transport firms outside the UK shipping goods to non-business customers in the UK this should not cause a UK registration requirement. • For movements of goods from


outside to inside the EU or from inside to outside the EU, any supply of services deemed to occur in the UK (and bear in mind that in such a case the supply is made in each territory the transport passes through) is a zero rated supply under item 5 Group 8 Schedule 8 VAT Act 1994. But wait. I said there were no real


problems and yet here there is a zero rated supply taking place in the UK. We all know that zero per cent is a rate of VAT with the supply being taxable (it is just that the tax is zero). With a zero registration


limit, does that mean that overseas hauliers travelling into EU will need a UK VAT registration? No - if UK supplies are all liable


to be zero rated, HMRC may grant exception from the requirement to be VAT registered (see para 7 Sch 3A VAT Act 1994). But to paraphrase Groucho


Marx, now the ‘VAT club’ does not want you as a member you might suddenly be interested in joining. The reason is simple. A zero rated supply in the UK gives entitlement to be registered – so why not register and reclaim the input tax on our hideously expensive fuel? For firms regularly entering UK from overseas, this would definitely be their stance. Once in a blue moon visitors will probably be grateful for the exception. So where can it go wrong?


Arguably, if a non UK transport company were to commence a transport in the UK to a non business customer in another EU state, then there would be a supply in UK which would need to be standard rated and, with a nil registration limit from December there would be a consequential registration liability. But how oſten will that happen? But you can never say never and


there is at least one circumstance where it might – removal firms. Here’s an example - a Frenchman who has lived in the UK moving back to France and who wants his removals handled by a firm close to his destination residence in France. The removal service will take place in the UK (customer not “in business”) and be standard rated. From December that will trigger a UK VAT registration issue for the French removals firm. Still, whilst over here the drivers can now console themselves with a VAT-free pasty. Of course, the way around this is to use a UK firm.


foreign companies means having to deal in denominations other than Sterling and then becoming victim to the winds of change in the currency markets. But knowing when to take the advantage of the euro exchange rate could save money. We are distinctly negative about


the single currency for the rest of 2012 and anticipate that the Euro will lose more ground against


Sterling, with the GBP/EUR rate possibly reaching €1.30 by the end of the summer. The Eurozone debt crisis is escalating faster than the EU leadership can come to a solution. The region’s growth prospects are weak, debt levels and borrowing costs continue to soar and the Euro membership of various peripheral countries has come into question. Consequently, investors are flooding out of


Issue 4 2012


the Euro and returning to safer currencies, such as the US dollar and in recent times, Sterling. The problems in Greece have


weighed particularly heavily on the Euro as the country battles with a stagnant economy, exacerbated by tough bailout terms and deeply unpopular austerity measures. This has led to two elections to try and form a working Government and market sentiment remains wary that Greece will be unable to transform their fortunes. Spain has also had its problems


15


of late, with high unemployment levels and the need to seek out €100bn loan to save their crumbling banking sector. This has weighed on sentiment towards the eurozone as a whole, especially as Spain is the region’s fourth largest economy. But


Spain and Greece aren’t


the only reasons why the Euro is performing badly, as across the region unemployment is at record highs, economic growth is being suppressed and bank lending remains restricted, much like the UK.


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