Indirect tax and brexit Andy Ilsley, RSM UK 11 March 2019

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What could Brexit mean for indirect tax? For UK importers and exporters For freight companies For HM Revenue & Customs

Brexit impact Customs declarations for EU shipments Potential customs duty and VAT costs Businesses exposed to customs procedures for first time Pressure on distribution supply chains Trade agreement?

The perfect storm? Brexit 29 March 2019 Additional 180,000 businesses to make customs declarations Full introduction of CDS March 2019 CDS designed for 55 million declarations CDS tested to 180 million declarations CDS may need to deliver 255(*) million declarations (* per NAO)

Case study Shoe importer exploring Brexit impact and mitigation

UK Importer – current position GSP Reduced duty Asian manufacturer UK Co Import and distribution EU EU Manufacturer GSP Free rate of duty Asian manufacturer EU Customers Non-EU Customers

Portuguese Manufacturer UK Importer – post Brexit UK Co Import and Distribution Asian Manufacturer No GSP Full duty Portuguese Manufacturer Full duty Asian Manufacturer No GSP Full duty EU Customers Full duty Non-EU customers EU

import and distribution function UK Importer – suggested solution UK Co EU import and distribution function (Netherlands) Asian Manufacturer No GSP Full duty EU manufacturer Full duty Asian Manufacturer No GSP Full duty EU Customers Full duty Non-EU customers EU

What are the VAT implications of Brexit?

Current Situation VAT is charged on the consumption of goods and services in the EU. VAT is payable by businesses involved in the chain of supply Goods exported from the UK to third countries and to businesses in the EU are generally zero rated supplies Goods sold B2C to EU countries are generally taxed in the UK or in the local country depending upon whether the distance selling threshold has been breached. VAT is declared on services in the country where the place of supply takes place. UK businesses benefit from certain central solutions for EU VAT such as distance selling, MOSS, TOMS, EU VAT refunds portal, VIES.

Post-Brexit Impact Preparations for ‘no deal’ HMRC have issued guidance to 145,000 businesses trading only with the EU EU VAT refunds – identify and claim before 29 March EORI numbers and Transitional Simplified Procedures UK MOSS registration to be cancelled and re-application made within 10 days elsewhere in EU ‘Postponed accounting’ for Import VAT Stockpiling of goods in UK or EU Fiscal Representation required for EU VAT registrations

The UK will continue to have a VAT system after it leaves the EU The UK will continue to have a VAT system after it leaves the EU. The revenue it provides is vital for funding public services. HMRC September 2018

What to consider? Will you be able to adopt postponed accounting easily? Do you supply B2C and rely on distance selling regulations? Will a distribution warehouse in the EU simplify your supplies and maintain your access to EU simplifications such as triangulation? Can you utilise an EU stock holding to leverage a benefit under the distance selling regulations? Do your sales terms leave you a requirement to register for VAT in other member states? Should you consider changing? Are your contracts properly ‘Brexit proof’? PLEASE DON’T FORGET MAKING TAX DIGITAL WILL APPLY IN THE UK FROM 1 APRIL 2019.