INTERNATIONAL TRADE
Facing up to Brexit tax practicalities
Among the changes exporters and importers are having to get used to in the post-Brexit trading climate involve new tax liabilities, namely VAT and customs duty, which must be managed to ensure efficiencies. Andy Ilsley (pictured), VAT director at audit, tax and consultancy firm RSM, explains what the key indirect tax issues are.
1. RULES OF ORIGIN Ensuring any goods traded between GB and the EU meet the respective rules of origin as laid down in the agreement – and this can be complex. Goods merely being shipped from either jurisdiction will be insufficient to qualify per se for tariff-free access. It should be remembered that duty can’t be recovered in principle, unlike import VAT.
2.PAPERWORK NECESSITIES Tariff and duty-free trading will, in any event, not prevent customs declarations being required at the respective EU and UK borders – and failure to have the right paperwork or arrangements in place is causing delays. It’s important to have clear
incoterms agreed between the buyer and seller so that both parties understand who has the respective obligations to prepare the goods for export and to complete the paperwork and declarations for importation as the goods arrive at the EU port of entry.
‘An EU Economic Operator Registration Identification number (EORI) will be required to clear goods for circulation in the EU’
Prior to the end of the transition period on 31 December 2020, incoterms were broadly academic when such transactions were intra- community supplies – now clarity is crucial. If goods are being delivered on
delivered duty paid (DDP) terms, for example, in order to minimise
46 business network April 2021 CASE STUDY
Intelligent Vending, a Derbyshire exporter that specialises in technology for self-service retail, has faced tax challenges since the end of the transition period. Director Sam Roe (pictured) explains what these were and how the company has responded.
What challenges have you faced from leaving the EU? The overall problem we faced was our trading involves complex supply chains with multiple parties involved within EU and the rest of the world. On many occasions, goods never even cross UK borders and they are routed directly through Europe to end clients. Our main challenge was to ensure we
could transition to the new systems required post-Brexit, and to structure our processes and incoterms in such a way that we would keep our EU customers happy,. Minimising administration for our supply chain partners in the EU was also a priority.
How have you sought to address these challenges? Initially, we focused on setting up systems to maintain trade of our faster moving component-related products, intending to then research origin regulations and new certifications for our own designed and manufactured technology solutions at a later date. In reality, this staggered approach has only been
possible due to the Covid-19 situation as the majority of work related to turnkey product development requires close contact with clients, which has not been possible due to the pandemic.
What types of tax issues have you faced? Sales tax was therefore the major issue for us as the UK was no longer part of the EU VAT scheme for simplified trading, so it was not possible to operate in the way we had previously. In addition, we required the ability to continue importing and exporting directly from the EU without incurring unnecessary costs and administration. We found it extremely difficult to get specialist advice without
paying large accountancy firms for consultancy. Many hours were spent researching online and trying to obtain advice through our network of contacts. The problem was that as many of our queries were
tax-related, third parties were therefore reluctant to offer advice – also, in many cases, it didn’t appear that the definitive position was clear across the board as we received conflicting views.
How have you managed to deal with the tax issues? We’ve now set up a Netherlands VAT number and EORI to mitigate issues where possible and we have so far found the country’s Tax and Customs Administration, the
Belastingdienst, to be extremely efficient when answering queries and processing
paperwork. Much of the online documentation is available in
English, but we have found that learning Dutch will certainly come in useful in the long term as the client area of its website, and all the hard copy documentation we have received to date, is not currently available in the English language. Moving forward, we intend to spend more time
analysing our supply chains with an intention to source more products from the UK and increase British manufacturing where possible. We are also re-working the designs for a number
of our own products to ensure these are post-Brexit friendly and tariff-free for export under the new regulations. To summarise, it has been a crazy amount of work,
but we are now starting to see light at the end of the tunnel and we intend to focus on growing our international trade, while opening up new markets for our products, as much as possible in the future.
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