Even with an additional six months to negotiate a Withdrawal agreement, a No-Deal Brexit is still a possibility. Businesses that file VAT returns in another EU country, or buy or sell goods within the EU, need to be aware of the steps they should take to prepare for a potential No-Deal.
Before going any further, you should advise clients to find out if they require Fiscal Representation to continue trading. If a No-Deal Brexit happens, as of 31st October any UK business without an EU establishment will no longer be considered an EU business.
Most EU countries will require a fiscal representative to be identified for UK companies with no EU establishment in order for them to continue to file VAT returns and potentially to trade as a VAT-registered entity in that country.
This is with the exception of a select number of countries where there is no requirement to appoint a fiscal representative such as Germany, Ireland, Czech Republic, Netherlands, Latvia, Malta, Luxembourg, Slovakia.
Fiscal representatives must be tax registered and they act as the local representative of the company, acting on behalf of non-resident companies. In some cases, the fiscal representative might have to take on joint and several liability for any VAT debts due.
In other jurisdictions, the fiscal representative does not have to take on this liability but instead provides a local, registered address for the tax authority to visit or correspond with.
The process of requesting fiscal representation can be time consuming and costly, however if requested in due time before Brexit, then it will be more likely to be accepted by local tax authorities.
Purchasing goods from the EU
In a No-Deal scenario UK businesses that purchases goods from the EU will be required to request a GB EORI number, which can be done online, meaning it’s vital to inform all clients of the right steps.
Once an EORI number is received, businesses should request to use Transitional Simplified Procedures (TSP) which will allow all imports from the EU to be treated in a similar way to the reverse charge mechanism on services – there will be no time lag in payment and recovery of import VAT, as is currently the case under the C79 certification scheme.
Although there may be an increase in red tape following Brexit, businesses can still trade with the EU providing the right steps are taken in advance.
Selling goods to EU customers
Many businesses may fall into the trap of being hesitant to sell goods to Europe in the lead up and following Brexit. The situation necessitates careful preparation and with the right procedures and advice, in theory, it should be business as usual.
Many businesses have begun to set up in Europe for the fear of being unable to trade following a No-Deal. However, tax authorities in the European countries have become suspicious of businesses setting up solely to obtain a European Tax certificate.
Consequently, they have begun to carry out more strenuous checks to ensure that the businesses are legitimate, which is delaying businesses from getting an EU Tax certificate in time for the Withdrawal Agreement.
Businesses can become the party responsible for the import of the goods into the EU, paying any relevant import VAT and duty, and potentially charging local VAT in the country of sale. This may require a local VAT registration which should be made clear.
The exact shape Brexit will take and the terms of any deal the UK strikes with the EU is still uncertain. As the Withdrawal Agreement negotiations continue, the implications of Brexit will hopefully become clearer.
Until that point, businesses must be advised to take the necessary steps to prepare for a potential No-Deal, while attempting to continue business as usual.
Although Brexit is a time of uncertainty for the nation, by keeping a finger on the pulse as negotiations develop, businesses should be able to prepare for whatever may arise.