The impact of Brexit on indirect tax

Learn more about the indirect tax changes which could arise as a result of Brexit.

This page details the indirect tax changes which could arise as a result of Brexit. These impacts are largely based on a No Deal scenario and the UK Government’s draft legislation. Content will be updated to reflect any significant changes in the legislation or political landscape.

NB These pages are in the process of being updated following the deferral of the UK’s leave date to 31 January 2020. Please reach out to your usual EY contact if you have any questions.

  • General

    • Domestic reverse charge and invoicing

      Original legislation reference

      EU VAT Directive, Articles 194 and 219a

      Current status

      Member States may apply a reverse charge to supplies of goods or services made by a non-established business to a business in the relevant member state. This is implemented in a wide variety of scenarios:

      – Installed and assembled goods
      – Services connected with immovable property
      – Services of 'admission'
      – Local supplies of goods.

      Outbound effect

      Currently, UK businesses can apply simplified rules and issue invoices in accordance with the UK invoicing rules. However, this simplification is only available for EU established suppliers.

      After Brexit, UK suppliers will, in theory, need to issue invoices conforming to the rules in each customer’s Member State.

      In addition, where they have no local registration in the applicable EU27 Member State, UK businesses will need to rely on the 13th VAT Directive to claim refunds of VAT

      Commentary

      The EU VAT Directive provides a framework for Member States to implement a domestic reverse charge in national legislation. In the event of a no deal Brexit, the UK would be able to revise/remove its national legislation in this area.

    • EC sales lists

      Original legislation reference

      Value Added Tax Act 1994, Section 55A, 65 and 66

      Current status

      EC Sales Lists are required to record intra-Community trade.

      Outbound effect

      ECSLs will not be required for intra-Community trade but S55A statements will be needed for missing trader fraud (and failure will be subject to penalties).

      Commentary

      In the event of the UK leaving the EU without a transitional agreement, UK businesses will not be required to submit EC Sales Lists for periods starting after the Brexit date.

      HMRC has published guidance explaining how to complete an EC Sales List before Brexit.

    • Fiscal representatives

      Original legislation reference

      Value Added Tax Act 1994, section 48

      Commentary

      Under the current rules, HMRC may direct a person to appoint a VAT representative for a tax payer who is not established in the UK and is established in a country which is not a Member State or a country without suitable mutual assistance provisions. The position post Brexit will need to be reviewed for non-UK businesses registered in the UK and also for UK businesses that register in other Member States (where the local rules will have to be complied with).

    • Import VAT deferment

      Original legislation reference

      Value Added Tax Act 1994, s1(4) and s16; Customs and Excise Management Act 1979, s43(1)

      Inbound effect

      Currently the requirement is to pay import VAT on or soon after the goods arrive at the UK border and to recover it on a subsequent return, using a C79 form as evidence of right to input VAT recovery.

      Outbound effect

      The new Import VAT Regulations (SI 2019/60) allow UK VAT registered businesses to change the way they account for VAT due on imported goods (import VAT). It enables such businesses that import goods to declare and recover (subject to normal rules) import VAT on their periodic VAT returns rather than declaring and paying import VAT when the goods arrive at the UK border.

      Commentary

      These Regulations address the consequences of the removal of the EU VAT accounting rules for intra-EU trade in goods and the extension of import VAT by removing the cash-flow disadvantage that would occur if current import VAT payment rules were applied to intra-EU trade. These regulations will only come into force in the event that the UK withdraws from the EU without a negotiated arrangement on a date or dates specified in a separate instrument.

      The Irish government has also published the Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Bill 2019 to prepare Ireland for a no-deal withdrawal by the UK. The Bill introduces a postponed accounting measure which will allow for import VAT to be accounted for by traders in their VAT returns rather than at importation. The Bill provides for Regulations to be made setting down conditions under which the measure would apply, e.g. financial guarantees being provided. It is worth noting that this measure would apply to imports from all third countries and not just the UK.

      HMRC guidance explains how to account for import VAT on all goods brought into the UK if it leaves the EU without a deal.

    • Movement of own goods

      Original legislation reference

      Value Added Tax Act 1994, Schedule 4(6)

      Current status

      Movement of own goods between EU member states treated as a supply of goods.

      Inbound effect

      Movement of own goods from EU to UK will be treated as an import.

      Outbound effect

      Movement of own goods from UK to EU will be treated as an export.

      Commentary

      In the event of the UK leaving the EU without a transitional agreement, the movement of own goods from the UK to the EU by UK businesses, may be treated as an export and subject to import VAT/duties in the Member State of destination/importation.

      Similarly, own goods moved by EU businesses to the UK may attract UK import VAT and duties.

    • Moving goods post Brexit

      Overview

      HMRC has published guidance providing step by step details regarding what you need to do to make sure you are able to send and receive goods with the EU, if the UK leaves the EU without a deal.

      Government Funded Training

      HMRC has provided guidance on how to apply for grant funding for recruitment, training and IT improvements if your business completes customs declarations.

      On 1 October, HMRC announced a further £10 million available in grants for intermediary businesses based in, or with a branch in, the UK, that currently complete customs declarations for importers and exporters. The funding is available to help towards hiring new staff to help businesses complete customs declarations.

      Applications will close once all the funding has been allocated, and by 31 January 2020 at the latest. Those that applied for the first and second wave may apply again as part of this new wave of grants.

      Customs processes and procedures

      The Government has published details of the UK’s temporary tariff regime for a no deal, designed to minimise costs to business and consumers while protecting vulnerable industries. This regime is temporary, applying for up to 12 months while a full consultation and review on a permanent approach to tariffs is undertaken.

      In the event of a no deal exit from the EU, British businesses would not pay customs duties on the majority of goods when importing into the UK. Under the temporary tariff, 87% of total imports to the UK by value would be eligible for tariff free access.

      The temporary tariff regime guidance provides links to tools and explains the procedure for establishing the appropriate temporary customs duty rates which would apply in a no deal scenario. There is also guidance on how to find the temporary rates of customs duty.

      Guidance regarding simplified customs processes for UK businesses trading with the EU. Please also see the section on transitional simplified procedures (TSP) below.

      Guidance detailing how leaving the EU without a deal affects existing authorisations to use customs procedures or other facilitations (simplified procedures). Depending on the type of facilitation, and whether HMRC or another EU customs authority provided that authorisation, businesses should check that they can carry on using it and whether it will be more limited. The customs special procedures covered in this Guidance include:

      • inward processing
      • outward processing
      • temporary admission
      • authorised use (also known as end use)
      • customs warehousing.

      Guidance (in draft form) containing the legal classification and import rate for products being imported into the UK. The Customs Tariff (Establishment) Regulations give effect to this document and establish a UK customs tariff. The tariff classifies goods and contains the rules for determining the correct amount of duty applicable to them. The Regulations establish a tariff by reference to the Tariff of the UK document.

      Guidance providing links to individual documents detailing product duty rates and the preferential rules of origin that will apply as a result of preferential agreements made between the UK and third countries, including Free Trade Agreements. The purpose of the Regulations is to ensure that the UK can set preferential import duties in line with any preferential arrangements that are in place, for example Free Trade Agreements.

      Guidance sets out the product specific rules which determine the origin of imports outside a preferential agreement. Non-Preferential Rules of Origin determine the economic nationality of imports that arrive outside preferential agreements.

      Guidance listing the cases where a relief from import duty may apply. It will be introduced by reference in a Statutory Instrument, The Customs (Reliefs from a liability to Import Duty)(EU Exit) Regulations 2019.

      HMRC has now issued Draft notices to be made under The Customs (Export) (EU Exit) Regulations 2018 and Draft notices to be made under The Customs (Records) (EU Exit) Regulations 2019.

      HMRC has also published Guidance in the form of a partnership pack to provide key stakeholders and intermediaries working with businesses with a high-level guide to customs processes and procedures that are likely to apply in a ‘no deal’ scenario. The following parts of the pack have been recently updated:

      • Partnership pack: preparing for changes at the UK border after a no deal EU Exit
      • Preparing for a no deal EU Exit - step-by-step guide to importing 
      • Preparing for a no deal EU Exit - step-by-step guide to exporting 
      • How this pack will help you prepare for a no deal scenario
      • Customs, excise, VAT and regulatory changes you need to know about if there is no deal

      Transitional Simplified Procedures (TSP)

      HMRC has published Guidance and further details explaining whether a business can register to use transitional simplified procedures (TSP) to import goods into the UK. Essentially TSP allow a registered importer to lodge a simplified declaration (with reduced datasets) to clear goods from the EU arriving in the UK and defer payment of import duties.

      For most goods imported using TSP, traders will now be able to delay putting in customs declarations for the first 6 months after EU exit. Businesses will have until 4 October 2019 to submit declarations and pay any import duty for goods imported up to 30 September 2019. After that, customs declarations and payments will need to be made on the fourth working day of the following month.

      HMRC is also giving importing businesses until 30 September 2019 to provide a guarantee that is required to cover any customs duties that they wish to defer. This will apply for all importers, not just those who have registered for TSP.

      Following discussions with stakeholders from across the ports industry, TSP will now be available for any port or airport where goods are being brought in from the EU. This was originally available for priority Roll-on-Roll-off locations like Dover or the Channel Tunnel. HMRC will continue to work with ports, including airports, and other key stakeholders on TSP implementation, recognising that circumstances will be different from port to port.

      TSP is designed to make importing easier for businesses importing goods to the UK from the EU that may be new to import declarations. Once registered for an EORI number they can take the next step and register for TSP.

      The original announcement, ‘HM Revenue and Customs simplifies importing from the EU as part of no deal preparation’, is available here.

      Please also refer to Making declarations using transitional simplified procedures.

      Please also see our EY alert which provides further details regarding how TSP will work, how long the arrangements will be used, and the TSP registration criteria.

      EORI number

      UK businesses trading with the EU will need a UK Economic Operator Registration and Identification (EORI) number to continue trading if the UK leaves the EU with no deal.

      HMRC guidance previously stated that a business with a EU EORI number (a non-UK one) would be able to continue using this number for a temporary period after the UK leaves the EU. However, they have since announced that this will not be possible and the guidance has been updated. Businesses importing or exporting with the UK will need a UK based EORI number i.e. starting with GB.

      Having an EORI number allows a business to:

      HMRC has updated its guidance to clarify that:

      ·       Northern Ireland businesses should also apply for an EORI number unless they only trade across the Northern Ireland-Ireland land border.

      ·       Businesses which have an EORI number starting with GB do not have to do anything, HMRC will provide further guidance shortly after the UK leaves  regarding the process for applying for a UK EORI number.

      HMRC has also released The Customs (Economic Operators Registration and Identification) (Amendment) (EU Exit) Regulations 2019, SI 2019/714. In the event of a no deal scenario the UK intends to closely model its customs systems on what currently applies under UCC rules. One of the key planks of the Union Customs Code (UCC) is its universal customs identifier (EORI number) which uniquely identifies the registered trader in terms of its name and address, allowing accurate identification of any person making declarations or applying for customs decisions or authorisations. These Regulations address failures of retained EU law to operate effectively or other deficiencies arising from the withdrawal of the UK from the EU.

      The UCC needs to be changed so that it applies specifically to the UK and not the whole customs territory of the EU, and references to ‘customs authorities’ are changed to ‘HMRC’. Certain other minor deletions remove UCC rules not needed once the UK is outside the EU customs territory. The UK will have an independent EORI system that will now only apply to traders resident or operating in the UK after EU exit. The amendments to the retained EU law contained in these Regulations will not have effect in relation to economic operators whose only customs activities consist of the trade of goods between Northern Ireland and Ireland. Further details on the arrangements for trade between Northern Ireland and Ireland will be published separately.

      Entry Summary Declarations

      The government has announced plans to phase in Entry Summary Declarations for EU imports in the event of a no-deal Brexit. From 29 March, there will be a transitional period of 6 months where businesses importing from the EU will not need to submit Entry Summary Declarations for their goods. This transitional period will not affect imports arriving from the rest of the world.

      After the six-month transitional period, carriers will be legally responsible for ensuring Entry Summary Declarations are submitted pre-arrival to HMRC at the time specified by mode of transport.

      Irish Border

      The formal Brexit proposal from the UK Government to the EU published on 2 October 2019. The offer to the EU of an "all-island regulatory zone" would mean Northern Ireland would have to follow EU rules for goods including agrifood. There would be additional regulatory checks on goods moving from Great Britain to Northern Ireland, but no further regulatory checks on goods entering Northern Ireland from Ireland. This would be achieved by ensuring that goods regulations in Northern Ireland are the same as those in the rest of the EU. However, Northern Ireland would leave the EU customs union with the rest of the UK, so there would have to be new customs checks between the North and South.

      The Government proposals suggest the vast majority of checks could be carried out electronically - but thinks a small number of physical checks would have to take place, either at business premises or at points in the supply chain.

      During the transition period, it seems that the Northern Ireland Assembly would have to consent to the arrangements to stay within the EU regulatory zone through a vote and would be given a further vote every four years on whether to preserve the arrangements.

      Previous Guidance sets out the Government’s approach to avoiding a hard border between Northern Ireland and Ireland if the UK leaves the EU without a deal. It sets out a unilateral, temporary approach to checks, processes and tariffs in Northern Ireland and confirms that the UK Government would not introduce any new checks or controls on goods at the land border between Ireland and Northern Ireland, including no customs requirements for nearly all goods.

      Because these are unilateral measures, they only mitigate the impacts from exit within the UK Government’s control, and do not set out the position in respect of tariffs or processes to be applied to goods moving from Northern Ireland to Ireland.

      HMRC has also published guidance explaining the import procedures for UK businesses moving goods from Ireland to Northern Ireland. If the UK leaves the EU without a deal, import VAT will be due on goods moving from Ireland to Northern Ireland at the relevant rate. This includes goods that end their journey in Northern Ireland or move through Northern Ireland on the way to Great Britain. This guidance explains the procedures for accounting for import VAT.

      HMRC has also published Guidance explaining the Customs procedures for businesses moving goods from Ireland to Northern Ireland. If the UK leaves the EU without a deal, goods moving between Ireland and Northern Ireland will face different procedures compared to other UK-EU trade. This approach will apply until longer-term arrangements are made. The Government will give advance notice before introducing any new requirements or changing existing ones.

      Temporary relaxation of declarations

      The Customs (Managed Transition Procedure) (EU Exit) Regulations 2019, SI 2019/487 provide HMRC with temporary powers to issue a public notice to relax the requirement to make a declaration by a certain time for certain traders importing or exporting certain goods from or to the EU. These are additional temporary changes to support trade immediately, and will not form part of the longer-term customs model.

      For both imports and exports, details of the traders that will be able to use this easement, the locations at which the easement will apply, the manner in which they will be able to declare the goods so that they can move freely, and the further information required to enable the full declaration process to be completed will be set out in a public notice. HMRC will also specify goods that will not be covered by this instrument in a public notice.

      These regulations will only be invoked if the Commissioners for HMRC believe this is necessary in order to maintain the smooth operation of the border.

      HMRC correspondence

      HMRC has issued two collections of letters:

      Correspondence with VAT-registered businesses trading with the EU explaining how to prepare for changes to customs, excise and VAT if the UK leaves the EU without a deal. A 'Letter to EU-only traders in the UK about next steps to get ready for Brexit - September 2019' has been added.

      Correspondence VAT-registered businesses trading with the EU and/or the rest of the world explaining how to prepare for changes to customs, excise and VAT if the UK leaves the EU without a deal. A 'Letter to rest of world and EU traders in the UK about next steps to get ready for Brexit - September 2019' has been added.

      VAT IT system rules and processes

      In the event that the UK leaves the EU without a deal, many UK businesses will need to apply the same processes to EU trade that apply when trading with the rest of the world.

      The rules and processes for VAT IT systems will change. This guidance is for businesses that:

      • Claim VAT refunds from EU countries
      • Need to check the validity of UK VAT registration numbers
      • Report sales of digital services to consumers in the EU using the UK VAT Mini One Stop Shop
      • Are under the VAT digital services threshold and make sales of digital services to consumers in the EU

      HMRC has now issued further Guidance explaining how non-UK businesses will pay VAT on digital services, reclaim VAT, and check UK VAT numbers if the UK leaves the EU without a deal.

      Roll on roll off ports and the Channel Tunnel

      Guidance providing process flows for freight roll-on, roll-off (RORO) imports and exports between the UK and the EU for a no-deal Brexit (excluding Northern Ireland).  

      Guidance regarding arrangements for importers or exporters using roll on roll off ports or the Channel Tunnel to transport goods between the EU and the UK.

      communications pack is also available which explains the changes at roll on roll off ports and Eurotunnel if the UK leaves the EU without a deal.

      HMRC has also released The Customs (Import Duty) (EU Exit) Regulations 2018 and the Customs (Export) (EU Exit) Regulations 2019 (Appointed Day) (EU Exit) Regulations 2019 SI 2019/1282

      These bring various other Regulations into force on 27th September 2019, enabling HMRC to publish a notice listing locations as a ‘roll-on, roll-off (RoRo) listed location’ (defined in regulation 130(1) of the Import Duty Regulations and regulation 52 of the Export Regulations).

      Other provisions in the Import Duty Regulations and Export Regulations will, when they are commenced, impose obligations in relation to certain goods that are imported or exported from a RoRo listed location.

      The government has also announced a new Freeports Advisory Panel to advise the Government on the establishment of up to 10 free ports. Four ports are quoted by the Department for International Trade as having shown an interest already but details on how ports and airports will be able to bid for free port status are still to be announced.

      The Department for International Trade suggests that free ports could be free of unnecessary checks and paperwork, and include customs and tax benefits. It also suggests that these zones reduce costs and bureaucracy, encouraging manufacturing businesses to set up or re-shore. It notes that the most successful free ports globally attract businesses and create jobs for local people through liberalised planning laws.

      More information is available here.

      Duty-free shopping

      The Chancellor has announced the return of duty-free shopping with EU countries if the UK leaves the EU without a deal.

      Those travelling from the UK to the EU will not have to pay excise duty on alcohol and cigarettes bought in UK ports, airports and international train stations. Those travelling from the EU to the UK can continue to bring back unlimited amounts if duty has already been paid in Europe, but there would also be the further possibility of buying limited amounts in duty-free shops in the EU without suffering UK excise duties on return.

      Duty-free shopping is already permitted for travellers going to non-EU countries. A consultation will be launched shortly on the Government’s long term duty-free policy.

      The HM Treasury news story is available here

      HMRC impact assessment

      HMRC have published a second edition of the impact assessment for the movement of goods if the UK leaves the EU without a deal, originally published on 4 December 2018. It has been updated to include the impact of the customs, VAT and excise regulations laid before Parliament in January 2019, alongside those laid in November 2018 under The Taxation (Cross-border Trade) Act 2018 (TCTA 2018) and the EU Withdrawal Act 2018 (EUWA 2018). The first edition is available here.

      As the impact of the regulations will cut across customs, VAT and excise, this impact assessment explains how businesses and individuals moving goods across the UK-EU border will be impacted for all 3 tax regimes.

      A third edition of the impact assessment will include the impacts of the further regulations that will be laid in Parliament in February and March.

    • Repayment claims

      Original legislation reference

      Value Added Tax Act 1994, Section 39A

      Current status

      HMRC is currently obliged to make arrangements for forwarding repayment claim applications to the tax authorities of the relevant EU Member State.

      Outbound effect

      HMRC will no longer have a legal obligation to make arrangements for dealing with applications made to them by UK registered taxpayers for VAT refunds on supplies or importations made in another Member State. HMRC is currently obliged to make arrangements for forwarding such applications to the tax authorities of the relevant EU Member State.

      Commentary

      UK businesses may need to use the existing processes for non-EU businesses in each Member State in which they incur VAT on costs, where they wish to claim a refund. The current paper-based system available to non-EU businesses in the UK may potentially be used in future by EU businesses if no agreement on the UK leaving the EU is reached.

    • Repayment of VAT to overseas businesses

      Original legislation reference

      Value Added Tax Act 1994, Section 39

      Current status

      HMRC may repay VAT on supplies made in the UK or on imports from places outside the Member States, if they were taxable persons in the UK.

      Outbound effect

      In a no-deal scenario, businesses in the EU will no longer be able to use the EU VAT refund electronic system to claim refunds of VAT incurred in the UK after 31 October 2019.

      HMRC has the power to make regulations to allow the recovery of VAT on supplies by those who carry on business outside the UK on supplies, where that VAT would have been deductible had they been VAT registered in the UK. The amendment also permits HMRC to make different provisions in relation to persons carrying on business in different places.

      Commentary

      In the event of the UK leaving the EU without a transitional agreement, the current EU refund system will no longer be applicable in the UK.

      EU businesses may apply for a VAT refund in the UK, under a different refund system.

      Similarly, UK businesses may continue to be able to claim refunds of VAT from EU Member States.

      HMRC has updated its guidance Claim VAT refunds from EU countries after Brexit  to clarify that, in the event of no deal, submissions for refund claims for 2018 made using the EU VAT refund electronic system would need to be made by 5pm on 31 October 2019. Please note that you should allow enough time for your member state to send the claim to the UK. If a claim is sent through the online system after the UK has left the EU, it will not reach the UK.

      After Brexit, EU businesses must use a manual process to reclaim VAT incurred in the UK before 31 October 2019. Information on how to do this will be available after 31 October in VAT Notice 723A. The deadline for EU businesses to submit a VAT refund claim will remain:

      • 30 September 2020 for claims for VAT incurred on expenses between 1 October 2019 and 31 October 2019
    • Various statutory instruments

      Collection: Customs, VAT and Excise regulations if the UK leaves the EU without a deal

      This collection brings together regulations, explanatory memorand, accompanying documents and an impact assessment in preparation for day 1, if the UK leaves the EU with no deal.

      The European Union (Withdrawal) Act 2018 (Exit Day) (Amendment) (No. 2) Regulations 2019, SI 2019/859

      These Regulations amend the definition of ‘exit day’ in section 20(1) of the European Union (Withdrawal) Act 2018 (the 2018 Act) from 12 April 2019 at 11.00pm to 31 October 2019 at 11.00pm, and consequently amend section 20(2) of the 2018 Act. Various provisions of the 2018 Act, including the repeal of the European Communities Act 1972, and a wide range of primary and secondary legislation, take effect or come into force on ‘exit day’.

      The objective of these Regulations is to ensure the correct functioning of the domestic statute book and to reflect in domestic law the further negotiated extension of the period in Article 50(3) TEU by amending the definition of ‘exit day’. These Regulations do not themselves extend the Article 50 process. The extension was agreed, as a matter of EU and international law, between the UK and the EU by a European Council decision and letter from the Permanent Representative of the United Kingdom to the EU, in accordance with Article 50(3) TEU, on 11 April 2019.

      Please refer to Technical update to the Withdrawal Agreement.

      The Customs (Export) (EU Exit) Regulations 2019, SI 2019/108

      These Regulations, on a contingency basis, lay down the main provisions governing the export of goods from the UK, including replacing provision currently set out in EU law. These Regulations are key in ensuring businesses can prepare for the UK leaving the EU, and are able to operate within the customs regime after EU exit. It will be commenced in full if a deal is not agreed following EU/UK negotiations.

      The Customs (Import Duty, Transit and Miscellaneous Amendments)(EU Exit) Regulations 2019, SI 2019/326

      These Regulations will be necessary to ensure the UK’s customs regime functions as intended after it leaves the EU, and lay down provisions for the import of goods to the UK should it exit without a deal, including replacing provisions currently set out in EU law.

      These Regulations include a range of temporary measures to enable trade to continue to flow while maintaining essential customs procedures.

      • They provide for a simpler process for gaining authorisation to use simplified customs procedures, and include easements for notifying HMRC when goods have arrived in the UK.
      • They simplify and relax the requirements for delaying the time of payment, and for financial guarantees.
      • They relax the liability rules where an intermediary uses their own Customs Freight Simplified Procedure authorisation on behalf of traders.
      • They will also provide for an interim process for arrivals of goods under the Common Transit Convention for a small number of entry ports.

      The Value Added Tax (Miscellaneous Amendments, Revocation and Transitional Provisions) (EU Exit) Regulations 2019, SI 2019/513

      These Regulations deal with the consequences of the UK leaving the EU without a deal and are the second of two miscellaneous instruments (see SI 2019/59 The Value Added Tax (Miscellaneous Amendments and Revocations) (EU Exit) Regulations 2019) each of which addresses a number of deficiencies in the UK’s secondary legislation relating to VAT which are a consequence of the its withdrawal from the EU and not covered by other instruments. It makes consequential amendments to the Value Added Tax Regulations 1995 (SI 1995/2518) and other VAT secondary legislation to reflect amendments made to the Value Added Tax Act 1994 by the Taxation (Cross-Border Trade) Act 2018 (TCTA).

      It also makes other amendments needed to ensure that the UK’s VAT system works as required, including transitional provisions necessary for the smooth implementation of the changes to VAT primary legislation made by TCTA. The amendments also make changes which are required as a consequence of provisions in other EU exit instruments to ensure that import VAT can still be collected.

      The Regulations include:

      • Consequential changes regarding zero-rating and the European Research Infrastructure Consortia (ERIC)
      • Provisions regarding Specified Supplies
      • Provisions regarding Partial Exemption Special Methods agreed with HMRC before the UK exits the EU
      • Transitional provisions in relation to the EU VAT refund system
      • Transitional provisions in respect of Fulfilment Houses. This instrument provides a nine month transitional period for those previously not required to seek approval to operate from HMRC (due to EU trade only) This transitional period gives affected businesses time to obtain the necessary approval to continue their business
      • Provisions for the ability to introduce further transitional provisions in Notices published by HMRC. This would cover, for example, how to make corrections and adjustments for tax declared under the Mini One-Stop Shop (MOSS) system for digital sales and for determining the tax point for supplies made under the Tour Operators Margin Scheme
      • Amendments to the Value Added Tax (Postal Packets and Amendment) (EU Exit) Regulations 2018 to extend the joint and several liability for import VAT on goods valued under £135 imported in postal packets
      • The Taxation (Cross-border Trade) (Miscellaneous Provisions) (EU Exit) Regulations 2019 (SI 2019/486) provides for businesses authorised to use Transitional Simplified procedures that make a simplified declaration within a specified period, to make a supplementary declaration after the end of that period. It provides for details of the period to be specified in a Notice. It is necessary to ensure that import VAT can still be collected as required to avoid risk to the revenue, and that provisions are in place to enable this. These Regulations introduce a power to make provisions that are considered appropriate in relation to the administration of VAT in these circumstances in a public notice.

      The Customs (Contravention of a Relevant Rule) (Amendment) (EU Exit) Regulations 2019, SI 2019/148

      These Regulations introduce customs civil penalties which HM Revenue and Customs (HMRC) can apply in circumstances when customs export requirements are not followed ensuring that there continues to be effective civil penalty provisions for export procedures. The instrument prescribes a range of specific circumstances where penalties can be applied, up to a maximum penalty of £2,500.

      The Customs (Consequential Amendments) (EU Exit) Regulations 2019, SI 2019/140

      These Regulations amend existing UK customs statutory instruments following the UK’s exit from the EU that contained references and terms/phrases that would no longer be appropriate in a post-exit environment (e.g. replace ‘customs territory’ with ‘United Kingdom’).

      The Export Control (Amendment) (EU Exit) Regulations 2019, SI 2019/137

      These Regulations address deficiencies of UK law arising from the withdrawal of the UK from the EU and ensure EU-derived domestic export control legislation operates effectively post-exit.

      The Customs (Records) (EU Exit) Regulations 2019, SI 2019/113

      These Regulations provide a requirement for those involved in customs matters to retain relevant records. The records to be retained, and the form and period of retention of these records will be set out in a notice that will be published before the instrument comes into effect. The Regulations will enable current record-keeping requirements set out in EU law to be replicated in UK law following EU Exit.

      The Statistics of Trade (Amendment etc.) (EU Exit) Regulations 2019, SI 2019/47

      These Regulations amend EU regulations which are being brought into force in the UK by the EU Withdrawal Act, to ensure that UK legislation is in place to collect information required for trade statistics after the UK leaves the EU.

      EU Regulations currently establish a common framework for the production of statistics relating to trade in goods between Member States. On exit from the EU the EU Regulations will no longer apply to the UK as a non-Member State. The Government needs to preserve these Regulations to ensure that trade in goods statistics continue to be collected, compiled and disseminated and remain consistent with worldwide standards. The preserved EU legislation will enable the ongoing collection of Extrastat trade statistics data where a customs declaration is required, and will allow the continuation of Intrastat for trade in goods between the UK and the remaining EU Member States. This is to ensure that there is no loss of statistical data, which is needed to meet international reporting requirements.

      In the event of no agreement being reached when the UK leaves the EU, trade statistics relating to imports and exports of goods will in most cases be collected from customs declarations. This instrument ensures that the UK has the continued right to collect trade statistics both through customs declarations and also through Intrastat declarations should customs declarations not be required. For example, Intrastat declarations might be needed if any changes are introduced which remove the need for customs declarations.

      The Customs Safety and Security Procedures (EU Exit) Regulations 2019, SI 2019/715

      These Regulations temporarily remove the requirement to submit safety and security information via entry summary declarations for goods being imported from territories where the UK does not currently require entry summary declarations. This includes, for example, the EU, Norway, and Switzerland. This transitional period will be in place for 6 months. They also make provisions to support the operation of the UK and Crown Dependencies customs union, namely that the movement of goods between the UK and the Channel Islands or Isle of Man do not require declarations for safety and security purposes.

      The Customs Safety and Security (Penalty) Regulations 2019, SI 2019/121

      The EU introduced a safety and security policy across Europe, governed by the UCC. It requires submission of safety and security declarations in order to risk assess goods before they arrive in or leave the EU. This protects the UK border against trafficking of illegal goods.

      These Regulations form part of legislation to be made under the European Communities Act 1972 to ensure that the UK has a safety and security penalty regime in place. It makes provision for civil penalties for non-compliance with certain safety and security obligations. These Regulations will continue to have effect under the European Union (Withdrawal) Act 2018 in the event of the UK leaving the EU without a deal to ensure the safety and security penalty regime remains operable after the UK’s departure date.

      These Regulations replace the current penalty regime for non-compliant traders who do not adhere to safety and security obligations at the UK border and are a tool to encourage traders to comply with their obligations.

      The Value Added Tax and Excise Personal Reliefs (Special Visitors and Goods Permanently Imported) (Amendment) (EU Exit) Regulations 2019, SI 2019/91

      These Regulations contain consequential measures as a result of the UK’s withdrawal from the EU. They ensure that certain goods brought into the UK by private individuals, diplomats and visiting forces that are currently free of UK VAT and excise duty (where applicable), continue to be so post EU exit.

      The Customs (Enforcement of Intellectual Property Rights) (Amendment) (EU Exit) Regulations 2019, SI 2019/514

      These Regulations ensure that UK legislation is in place after exit day (29 March 2019) enabling HMRC to continue to be able to enforce intellectual property rights at the UK border in the event that it leaves the EU without a deal.

      The Taxation (Cross-border Trade) Act 2018 (Appointed Day No. 5 and Miscellaneous Commencements) (EU Exit) Regulations 2019, SI 2019/819

      These Regulations bring into force on 8 April 2019 customs provisions that enable premises to be approved as transit sheds for imported goods, They also give effect to preparatory provisions in relation to payment and deferment of import duty, as well as simplified procedures in relation to the new Crown Dependencies Customs Union.

      The Taxation (Cross-border Trade) (Miscellaneous Provisions) (EU Exit) Regulations 2019, SI 2019/486

      In the event of the UK leaving the EU without a negotiated deal, these Regulations introduce new arrangements for travellers who bring commercial goods into the UK in accompanied baggage or small vehicles. They modify some of the declaration requirements that will be applicable at Roll on Roll off (RoRo) locations, and make other miscellaneous amendments to existing customs regulations.

      The Customs (Revocation of Retained Direct EU Legislation, etc.) (EU Exit) Regulations 2019, SI 2019/698

      These Regulations revoke retained EU legislation which will not be needed if the UK leaves the EU without a deal, and ensure that imports and exports between the Channel Islands and the UK are excluded from the collection of trade statistics.

      The Customs (Crown Dependencies Customs Union)(EU Exit) Regulations 2018, SI 2019/385 etc.

      The Isle of Man, Jersey and Guernsey have a distinct customs relationship with the UK arising from the terms of the UK’s accession to the EU which allows goods to be imported into the UK from these dependencies free from customs duty.

      These Regulations modify various customs rules to take account of the customs union arrangements between the UK and the Crown Dependencies (Isle of Man, Guernsey and Jersey), which will take effect once the UK and the Crown Dependencies cease to be part of the EU customs territory.

      The regulations below give effect to specific provisions in customs arrangements in order to maintain the current customs relationship after the UK leaves the EU.

      Isle of Man Regulations

      Jersey Regulations

      Guernsey Regulations

      The Customs Safety and Security Procedures (EU Exit) (No. 2) Regulations 2019, SI 2019/1219

      These Regulations form part of legislation to ensure the UK has a customs safety and security regime in place after its departure from the EU. It introduces a discretionary power for HMRC for a period of 12 months to allow businesses a longer period over which to submit safety and security declarations for certain exports and provides further changes in relation to safety & security in the event that no deal is reached for leaving the EU. They come into force on exit day.

      The Customs and Excise (Miscellaneous Provisions and Amendments) (EU Exit) Regulations 2019, SI 2019/1215

      These Regulations form part of legislation to be made under the Taxation (Cross-Border Trade) Act 2018 (TCTA) and the Customs and Excise Management Act 1979 (CEMA) to ensure that, in the event of the UK leaving the EU without a negotiated deal, the UK has a customs regime in place before exit day. Matters covered in this instrument include: banana weighing and certification; a requirement to provide a guarantee for import duty and excise duty in certain cases; the making and amendment of declarations by non-business travellers; declaration requirements in relation to pleasure craft and private aircraft and rights of appeal and review in relation to certain non-fiscal decisions made by HMRC, such as in relation to approval as an authorised economic operator for security and safety. The instrument also includes technical updates and corrections to other customs legislation and comes into force partly on 3 October 2019 and fully on such day as the Treasury may by regulations under section 52 of the TCTA appoint.

      The Customs (Import Duty) (EU Exit) Regulations 2018, SI 2018/1248

      HMRC has published an updated version of the Draft Notices to be made under The Customs (Import Duty) (EU Exit) Regulations 2018. The proposed text is a draft of the notices that HMRC will make using the powers provided by the SI. The content is, at this stage, indicative, as the text will need to be updated to reflect further policy development and updates to other publications, such as forms and guidance on the UK Tariff (i.e. Volume 3 of the UK tariff), which are required before the UK’s exit from the EU. The notices will be made before exit and come into force at the same time as the SI is commenced. Where HMRC is not in a position to provide a draft at the current time, an indication of when a draft notice will be made available has been provided.  

    • VAT registration

      Current Status

      As part of preparations for no deal Brexit, HMRC have put in place temporary arrangements enabling certain non-UK businesses, who do not currently need to register for VAT in the UK by virtue of cross-border simplification schemes such as call off stock simplification, to submit advanced notification of UK VAT registration from 27 September 2019.

      Further information can be found in VAT Notice 700/1, including how to submit advanced notification.

      These registrations will only go live if the UK leaves the EU without a deal.

  • Electronic services

    • B2C Telecommunications, Broadcasting, Electronically Supplied Services and MOSS

      Original legislation reference

      Value Added Tax Act 1994, Schedule 4A, para 15 (place of supply); and Section 3A and Schedule 3B (MOSS)

      Current status

      B2C telecommunications, broadcasting and electronically supplied services are taxed in the country where the customer is established or resides. EU sales trigger VAT registration obligations in each Member State, but Union or non-Union Mini One Stop Shop (MOSS) scheme simplifications are available.

      Inbound effect

      The UK will no longer be part of the VAT MOSS system. This means non-UK businesses will no longer be able to account for UK VAT due on their UK sales via a MOSS registration. Equally they will no longer be able to register and base their MOSS registration in the UK with HMRC collecting and passing on the VAT due to other EU Member States on their behalf. Businesses may still have the option of registering for MOSS in another EU country.

      Non-UK businesses supplying any digital services to a UK consumer will need to register for UK VAT. The current €10,000 threshold for cross-border sales of digital services will no longer apply.

      You’ll need to follow HMRC’s VAT correction process to correct a UK VAT figure submitted in a previous MOSS return. You have up to 4 years from the end of the period relating to that return to do this.

      Outbound effect

      UK companies will no longer be able to use the Union Scheme based out of the UK. If they have other EU establishments, the Union Scheme will need to be moved to one of these Member States. If the UK is the only establishment for VAT purposes, they instead must register for the non-Union Scheme in an EU27 Member State. The non-Union scheme was previously only available where the supplier had no other VAT registrations in the EU, but this criterion was removed from 1 January 2019 so UK suppliers should have unfettered access to the non-Union Scheme.

      HMRC has published guidance for businesses who will sell digital services to EU customers after Brexit. The final VAT return under the UK’s VAT MOSS system will be the period ending 31 December 2019 and should only include sales made before Brexit. This will need to be submitted by 20 January 2020.

      Where telecoms, broadcasting and electronically supplied services are supplied on board intra-EU passenger transport there is a rebuttable presumption that the customer is deemed to be resident in the Member State of departure. There is no similar presumption for international passenger transport, so suppliers will need to determine each customer's actual place of residence.

      HMRC has recently released an Order making provision to repeal the changes which came into effect on 1 January 2019 in relation to the place of supply of digital services in the event of a no-deal Brexit. The Order amends Schedule 4A VATA94, removing the low value place of supply simplification which applies where cross-border digital sales are less than £8,818 p.a. Therefore, any B2C supplies of digital services made by a UK business after leaving the EU would be taxable based on the customer’s location.

      Commentary

      For UK businesses supplying digital services to non-business customers in the EU, the ‘place of supply’ will continue to be where the customer resides. Local VAT will be due in those EU27 Member States. In the event of the UK leaving the EU without an agreement, UK businesses should be able to register for the MOSS non-Union scheme in a different EU27 country.

      Similarly, UK VAT will be due on digital services supplied by non-UK businesses to UK customers, and a UK VAT registration required to remit this.

      Non-EU businesses currently registered for the MOSS scheme, with the UK as a Member State of Identification, would need to register for the VAT non-Union MOSS scheme in an EU Member State to account for VAT on other EU sales. The non-Union scheme requires businesses to register for MOSS by the 10th day of the calendar month following the first sale. The MOSS registration will be backdated to the date of the first sale.

      UK businesses registered for Union MOSS in the UK will not be able to apply for MOSS elsewhere in EU27 (Union or non-Union) until Brexit (i.e. after 31 October)..

      If they make any relevant sales on 31 October – 1 November, they will need to register for their new non-Union MOSS (in another EU27 country) by 10 November, and submit their first new return on 20 November. This is a very short timeline, and there could be delays and a backlog if lots of applications are received on 31 October.

      (From 1 January 2019, businesses established outside the EU making supplies of digital services to EU consumers may register for the non-Union scheme even if they are registered for VAT in the EU for other reasons).

      The removal of the low value place of supply simplification in the event of a no-deal Brexit means that all UK businesses supplying B2C digital services cross-border into the EU will need to consider their registration requirements, and the possibility of registering under the non-Union MOSS scheme.

    • Registration for the non-Union MOSS scheme

      Original legislation reference

      Value Added Tax Act 1994, Section 3A and Schedule 3B

      Current status

      Sch.3B of VATA 1994 set out the registration for the Non-Union VAT Mini One Stop Shop (MOSS) scheme. Non-EU Businesses supplying certain digital services to other EU countries could register and pay VAT in the UK rather than having multiple registrations around the EU.

      Inbound effect

      The UK will no longer be part of the VAT MOSS system. This means businesses will no longer be able to register for the scheme in the UK with HMRC collecting and passing on the VAT due to other EU member states on their behalf. Businesses may still have the option of registering for MOSS in another EU country.

      Commentary

      In the event of the UK leaving the EU without an agreement, UK businesses that sell digital services to consumers in the EU will be able to register for the MOSS non-Union scheme.

      Non-EU businesses currently registered for the MOSS scheme, with the UK as a Member State of identification, would need to register for the VAT non-Union MOSS scheme in an EU Member State.

      The non-Union scheme requires businesses to register for MOSS by the 10th day of the calendar month following the first sale. The MOSS registration will be backdated to the date of the first sale.

      (From 1 January 2019, businesses established outside the EU making supplies of digital services to EU consumers may register for the non-Union scheme even if they are registered for VAT in the EU for other reasons).

  • Goods

    • Call-off stock simplification

      Original legislation reference

      EU VAT Directive, Articles 14 and 20

      Current status

      Customer accounts for acquisition tax according to the acquisition tax point applied by the Member State.

      Inbound effect

      Call-off stock sent from the EU to the UK will give rise to an importation. If the EU Co acts as importer, its supply to the customer will take place in the UK. EU Co will have a liability to register in the UK.

      The issue will not arise if the customer acts as importer, although the customer will need to have title to the goods to recover the import VAT.

      Outbound effect

      Call-off stock sent from the UK to the EU will give rise to an importation. If UK Co acts as importer, its supply to the customer will take place in the EU. Subject to any 'domestic' reverse charge, UK Co will have a liability to register in the relevant Member State.

      This issue will not arise if the customer acts as importer.

      Commentary

      As the simplification provision is only available for intra-Community transactions, it will no longer apply in the event of the UK leaving the EU, with no agreement on transitional arrangements.

      UK suppliers currently using the simplification provisions in other Member States may be required to register in each Member State where stocks are held and supplies made and potentially charge local VAT.

      If the UK removes the call-off stock treatment, goods arriving into the UK from the EU as call off stock may be treated as imports and be subject to import VAT/duty. This would result in a cash flow disadvantage for UK businesses, subject to the anticipated postponed accounting provisions being implemented (see below under ‘Import VAT deferment’).

    • Goods sent for processing or repair

      Original legislation reference

      EU VAT Directive, Article 17

      Current status

      Where goods are sent for processing and returned within the EU, no intra-Community supply or acquisition occurs and no registration liability arises.

      Where goods are sent for processing within the EU but not returned, a fictitious intra-Community supply and acquisition occurs. The supplier is liable to register in the Member State where the goods are processed.

      Inbound effect

      If the UK is the processing country there may be potential VAT implications. If the principal acts as importer, in the absence of a local UK VAT registration they will need to rely on a UK VAT refund scheme (if any).

      If the processor acts as importer of the raw materials, previous CJEU case law (which will still be relied upon in the UK) suggests the processor will have no right to deduct the VAT incurred.

      The impact of VAT and any duty can be mitigated via inward and outward processing reliefs.

      Outbound effect

      Where goods are sent for processing in the EU, the movement of goods will be subject to customs control. The impact of VAT and any duty can be mitigated via inward and outward processing reliefs. If these are applied and all conditions are met:

      – No VAT or duty will be payable in the processor's territory
      – The amount of VAT and any duty due in the UK will be calculated by reference to the value added by the processing.

      Commentary

      The current legislation provides a relief from import VAT and customs duties to EU businesses; this may no longer be available to UK businesses in the event of the UK leaving the EU without an agreement, which could result in import VAT and duty costs. Similarly, the UK may impose import VAT and duties to EU businesses currently using such simplifications for goods entering the UK.

    • Import VAT deferment

      Original legislation reference

      Value Added Tax Act 1994, s1(4) and s16; Customs and Excise Management Act 1979, s43(1)

      Inbound effect

      Currently the requirement is to pay import VAT on or soon after the goods arrive at the UK border and to recover it on a subsequent return, using a C79 form as evidence of right to input VAT recovery.

      Outbound effect

      The new Import VAT Regulations (SI 2019/60) allow UK VAT registered businesses to change the way they account for VAT due on imported goods (import VAT). It enables such businesses that import goods to declare and recover (subject to normal rules) import VAT on their periodic VAT returns rather than declaring and paying import VAT when the goods arrive at the UK border.

      Commentary

      These Regulations address the consequences of the removal of the EU VAT accounting rules for intra-EU trade in goods and the extension of import VAT by removing the cash-flow disadvantage that would occur if current import VAT payment rules were applied to intra-EU trade. These regulations will only come into force in the event that the UK withdraws from the EU without a negotiated arrangement on a date or dates specified in a separate instrument.

      The Irish government has also published the Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Bill 2019 to prepare Ireland for a no-deal withdrawal by the UK. The Bill introduces a postponed accounting measure which will allow for import VAT to be accounted for by traders in their VAT returns rather than at importation. The Bill provides for Regulations to be made setting down conditions under which the measure would apply, e.g. financial guarantees being provided. It is worth noting that this measure would apply to imports from all third countries and not just the UK.

      HMRC guidance explains how to account for import VAT on all goods brought into the UK if it leaves the EU without a deal.

    • Import VAT on postal packets

      Original legislation reference

      Value Added Tax Act 1994, Section 16(2)

      Current status

      Current legislation preserves the power to make regulations in relation to import VAT under the Postal Services Act 2000 for goods imported or exported in postal packets.

      Inbound effect

      The new Postal Packets Regulations (SI 2018/1376) make an overseas supplier liable for import VAT on any consignment of goods sent into the UK in a postal packet (letters, parcels, packets or any other article that could be sent by post even if they are sent by different means) if the value of the goods is £135 or less for customs purposes. In addition, it creates a registration and accounting scheme for those suppliers to account for the import VAT and provides for others to be jointly and severally liable for that import VAT in certain circumstances.

      The Regulations also remove the import VAT relief for commercial imports of goods valued at £15 or less [Low Value Consignment Relief (LVCR)].

      Commentary

      The purpose of the Statutory Instrument is to help ensure the flow of parcels into the UK while maintaining tax revenue in the event that the UK leaves the EU without a negotiated settlement.

      Further Regulations have been laid which amend current data gathering legislation to add ‘postal operators’ as a category of data holders from which data may be required. Their purpose is to enable HMRC to ensure that overseas businesses sending goods to the UK in postal packets comply with the new regulations.

      Further Regulations (SI 2019/104) appoint 28th January 2019 for the coming into force of regulations 4, 7, 10 and 12 of the new Postal Packets Regulations (SI 2018/1376. By virtue of the commencement made by these Regulations, suppliers are enabled to register under the Postal Packet Regulations in advance of the rest of the Postal Packet Regulations coming into force.

      You can find further information in HMRC’s Collection on the topic.

      HMRC has also released an impact assessment setting out the impact of the changes made by the new regulations.

      Please also refer to HMRC’s Collection which includes:

      • Import VAT on parcels you sell to UK buyers (VAT notice 1003) - Guidance regarding how to pay import VAT on goods you sell and send to UK buyers if you are based outside the UK, if the UK leaves the EU without a deal.
      • Manage your import VAT on parcels< - Guidance regarding the online service to view the import VAT on parcels reference.
      • Register for import VAT on parcels you sell to UK buyers - Guidance explaining how to register for import VAT on parcels sold to UK buyers and the payment process.

    • Moving goods post Brexit

      Overview

      HMRC has published guidance providing step by step details regarding what you need to do to make sure you are able to send and receive goods with the EU, if the UK leaves the EU without a deal.

      Government Funded Training

      HMRC has provided guidance on how to apply for grant funding for recruitment, training and IT improvements if your business completes customs declarations.

      On 1 October, HMRC announced a further £10 million available in grants for intermediary businesses based in, or with a branch in, the UK, that currently complete customs declarations for importers and exporters. The funding is available to help towards hiring new staff to help businesses complete customs declarations.

      Applications will close once all the funding has been allocated, and by 31 January 2020 at the latest. Those that applied for the first and second wave may apply again as part of this new wave of grants.

      Customs processes and procedures

      The Government has published details of the UK’s temporary tariff regime for a no deal, designed to minimise costs to business and consumers while protecting vulnerable industries. This regime is temporary, applying for up to 12 months while a full consultation and review on a permanent approach to tariffs is undertaken.

      In the event of a no deal exit from the EU, British businesses would not pay customs duties on the majority of goods when importing into the UK. Under the temporary tariff, 87% of total imports to the UK by value would be eligible for tariff free access.

      The temporary tariff regime guidance provides links to tools and explains the procedure for establishing the appropriate temporary customs duty rates which would apply in a no deal scenario. There is also guidance on how to find the temporary rates of customs duty.

      Guidance regarding simplified customs processes for UK businesses trading with the EU. Please also see the section on transitional simplified procedures (TSP) below.

      Guidance detailing how leaving the EU without a deal affects existing authorisations to use customs procedures or other facilitations (simplified procedures). Depending on the type of facilitation, and whether HMRC or another EU customs authority provided that authorisation, businesses should check that they can carry on using it and whether it will be more limited. The customs special procedures covered in this Guidance include:

      • inward processing
      • outward processing
      • temporary admission
      • authorised use (also known as end use)
      • customs warehousing.

      Guidance (in draft form) containing the legal classification and import rate for products being imported into the UK. The Customs Tariff (Establishment) Regulations give effect to this document and establish a UK customs tariff. The tariff classifies goods and contains the rules for determining the correct amount of duty applicable to them. The Regulations establish a tariff by reference to the Tariff of the UK document.

      Guidance providing links to individual documents detailing product duty rates and the preferential rules of origin that will apply as a result of preferential agreements made between the UK and third countries, including Free Trade Agreements. The purpose of the Regulations is to ensure that the UK can set preferential import duties in line with any preferential arrangements that are in place, for example Free Trade Agreements.

      Guidance sets out the product specific rules which determine the origin of imports outside a preferential agreement. Non-Preferential Rules of Origin determine the economic nationality of imports that arrive outside preferential agreements.

      Guidance listing the cases where a relief from import duty may apply. It will be introduced by reference in a Statutory Instrument, The Customs (Reliefs from a liability to Import Duty)(EU Exit) Regulations 2019.

      HMRC has now issued Draft notices to be made under The Customs (Export) (EU Exit) Regulations 2018 and Draft notices to be made under The Customs (Records) (EU Exit) Regulations 2019.

      HMRC has also published Guidance in the form of a partnership pack to provide key stakeholders and intermediaries working with businesses with a high-level guide to customs processes and procedures that are likely to apply in a ‘no deal’ scenario. The following parts of the pack have been recently updated:

      • Partnership pack: preparing for changes at the UK border after a no deal EU Exit
      • Preparing for a no deal EU Exit - step-by-step guide to importing 
      • Preparing for a no deal EU Exit - step-by-step guide to exporting 
      • How this pack will help you prepare for a no deal scenario
      • Customs, excise, VAT and regulatory changes you need to know about if there is no deal

      Transitional Simplified Procedures (TSP)

      HMRC has published Guidance and further details explaining whether a business can register to use transitional simplified procedures (TSP) to import goods into the UK. Essentially TSP allow a registered importer to lodge a simplified declaration (with reduced datasets) to clear goods from the EU arriving in the UK and defer payment of import duties.

      For most goods imported using TSP, traders will now be able to delay putting in customs declarations for the first 6 months after EU exit. Businesses will have until 4 October 2019 to submit declarations and pay any import duty for goods imported up to 30 September 2019. After that, customs declarations and payments will need to be made on the fourth working day of the following month.

      HMRC is also giving importing businesses until 30 September 2019 to provide a guarantee that is required to cover any customs duties that they wish to defer. This will apply for all importers, not just those who have registered for TSP.

      Following discussions with stakeholders from across the ports industry, TSP will now be available for any port or airport where goods are being brought in from the EU. This was originally available for priority Roll-on-Roll-off locations like Dover or the Channel Tunnel. HMRC will continue to work with ports, including airports, and other key stakeholders on TSP implementation, recognising that circumstances will be different from port to port.

      TSP is designed to make importing easier for businesses importing goods to the UK from the EU that may be new to import declarations. Once registered for an EORI number they can take the next step and register for TSP.

      The original announcement, ‘HM Revenue and Customs simplifies importing from the EU as part of no deal preparation’, is available here.

      Please also refer to Making declarations using transitional simplified procedures.

      Please also see our EY alert which provides further details regarding how TSP will work, how long the arrangements will be used, and the TSP registration criteria.

      EORI number

      UK businesses trading with the EU will need a UK Economic Operator Registration and Identification (EORI) number to continue trading if the UK leaves the EU with no deal.

      HMRC guidance previously stated that a business with a EU EORI number (a non-UK one) would be able to continue using this number for a temporary period after the UK leaves the EU. However, they have now announced that this will not be possible. Businesses importing or exporting with the UK will need a UK based EORI number.

      Having an EORI number allows a business to:

      • Trade goods into or out of the UK
      • Submit declarations using software (or to give to an agent to make these declarations)
      • apply to be authorised for customs simplifications and procedures

      HMRC has updated its guidance to clarify that:

      • Northern Ireland businesses should also apply for an EORI number unless they only trade across the Northern Ireland-Ireland land border.
      • Businesses which have an EORI number starting with GB do not have to do anything. HMRC will provide further guidance shortly after the UK leaves regarding the process for applying for a UK EORI number.

      HMRC has now released The Customs (Economic Operators Registration and Identification) (Amendment) (EU Exit) Regulations 2019, SI 2019/714. In the event of a no deal scenario the UK intends to closely model its customs systems on what currently applies under UCC rules. One of the key planks of the Union Customs Code (UCC) is its universal customs identifier (EORI number) which uniquely identifies the registered trader in terms of its name and address, allowing accurate identification of any person making declarations or applying for customs decisions or authorisations. These Regulations address failures of retained EU law to operate effectively or other deficiencies arising from the withdrawal of the UK from the EU.

      The UCC needs to be changed so that it applies specifically to the UK and not the whole customs territory of the EU, and references to ‘customs authorities’ are changed to ‘HMRC’. Certain other minor deletions remove UCC rules not needed once the UK is outside the EU customs territory. The UK will have an independent EORI system that will now only apply to traders resident or operating in the UK after EU exit. The amendments to the retained EU law contained in these Regulations will not have effect in relation to economic operators whose only customs activities consist of the trade of goods between Northern Ireland and Ireland. Further details on the arrangements for trade between Northern Ireland and Ireland will be published separately.

      Entry Summary Declarations

      The government has announced plans to phase in Entry Summary Declarations for EU imports in the event of a no-deal Brexit. From 29 March, there will be a transitional period of 6 months where businesses importing from the EU will not need to submit Entry Summary Declarations for their goods. This transitional period will not affect imports arriving from the rest of the world.

      After the six-month transitional period, carriers will be legally responsible for ensuring Entry Summary Declarations are submitted pre-arrival to HMRC at the time specified by mode of transport.

      Irish Border

      The formal Brexit proposal from the UK Government to the EU published on 2 October 2019. The offer to the EU of an "all-island regulatory zone" would mean Northern Ireland would have to follow EU rules for goods including agrifood. There would be additional regulatory checks on goods moving from Great Britain to Northern Ireland, but no further regulatory checks on goods entering Northern Ireland from Ireland. This would be achieved by ensuring that goods regulations in Northern Ireland are the same as those in the rest of the EU. However, Northern Ireland would leave the EU customs union with the rest of the UK, so there would have to be new customs checks between the North and South.

      The Government proposals suggest the vast majority of checks could be carried out electronically - but thinks a small number of physical checks would have to take place, either at business premises or at points in the supply chain.

      During the transition period, it seems that the Northern Ireland Assembly would have to consent to the arrangements to stay within the EU regulatory zone through a vote and would be given a further vote every four years on whether to preserve the arrangements.

      Previous Guidance sets out the Government’s approach to avoiding a hard border between Northern Ireland and Ireland if the UK leaves the EU without a deal. It sets out a unilateral, temporary approach to checks, processes and tariffs in Northern Ireland and confirms that the UK Government would not introduce any new checks or controls on goods at the land border between Ireland and Northern Ireland, including no customs requirements for nearly all goods.

      Because these are unilateral measures, they only mitigate the impacts from exit within the UK Government’s control, and do not set out the position in respect of tariffs or processes to be applied to goods moving from Northern Ireland to Ireland.

      HMRC has also published guidance explaining the import procedures for UK businesses moving goods from Ireland to Northern Ireland. If the UK leaves the EU without a deal, import VAT will be due on goods moving from Ireland to Northern Ireland at the relevant rate. This includes goods that end their journey in Northern Ireland or move through Northern Ireland on the way to Great Britain. This guidance explains the procedures for accounting for import VAT.

      HMRC has also published Guidance explaining the Customs procedures for businesses moving goods from Ireland to Northern Ireland. If the UK leaves the EU without a deal, goods moving between Ireland and Northern Ireland will face different procedures compared to other UK-EU trade. This approach will apply until longer-term arrangements are made. The Government will give advance notice before introducing any new requirements or changing existing ones.

      Temporary relaxation of declarations

      The Customs (Managed Transition Procedure) (EU Exit) Regulations 2019, SI 2019/487 provide HMRC with temporary powers to issue a public notice to relax the requirement to make a declaration by a certain time for certain traders importing or exporting certain goods from or to the EU. These are additional temporary changes to support trade immediately, and will not form part of the longer-term customs model.

      For both imports and exports, details of the traders that will be able to use this easement, the locations at which the easement will apply, the manner in which they will be able to declare the goods so that they can move freely, and the further information required to enable the full declaration process to be completed will be set out in a public notice. HMRC will also specify goods that will not be covered by this instrument in a public notice.

      These regulations will only be invoked if the Commissioners for HMRC believe this is necessary in order to maintain the smooth operation of the border.

      HMRC correspondence

      HMRC has issued two collections of letters:

      Correspondence with VAT-registered businesses trading with the EU explaining how to prepare for changes to customs, excise and VAT if the UK leaves the EU without a deal. A 'Letter to EU-only traders in the UK about next steps to get ready for Brexit - September 2019' has been added.

      Correspondence VAT-registered businesses trading with the EU and/or the rest of the world explaining how to prepare for changes to customs, excise and VAT if the UK leaves the EU without a deal. A 'Letter to rest of world and EU traders in the UK about next steps to get ready for Brexit - September 2019' has been added.

      VAT IT system rules and processes

      In the event that the UK leaves the EU without a deal, many UK businesses will need to apply the same processes to EU trade that apply when trading with the rest of the world.

      The rules and processes for VAT IT systems will change. This guidance is for businesses that:

      • Claim VAT refunds from EU countries
      • Need to check the validity of UK VAT registration numbers
      • Report sales of digital services to consumers in the EU using the UK VAT Mini One Stop Shop
      • Are under the VAT digital services threshold and make sales of digital services to consumers in the EU

      HMRC has now issued further Guidance explaining how non-UK businesses will pay VAT on digital services, reclaim VAT, and check UK VAT numbers if the UK leaves the EU without a deal.

      Roll-on roll-off, ports and  the Channel Tunnel

      Guidance providing process flows for freight roll-on, roll-off (RORO) imports and exports between the UK and the EU for a no-deal Brexit (excluding Northern Ireland). 

      Guidance regarding arrangements for importers or exporters using roll on roll off ports or the Channel Tunnel to transport goods between the EU and the UK.

      A communications pack is also available which explains the changes at roll on roll off ports and Eurotunnel if the UK leaves the EU without a deal.

      HMRC has also released The Customs (Import Duty) (EU Exit) Regulations 2018 and the Customs (Export) (EU Exit) Regulations 2019 (Appointed Day) (EU Exit) Regulations 2019 SI 2019/1282

      These bring various other Regulations into force on 27th September 2019, enabling HMRC to publish a notice listing locations as a ‘roll-on, roll-off (RoRo) listed location’ (defined in regulation 130(1) of the Import Duty Regulations and regulation 52 of the Export Regulations).

      Other provisions in the Import Duty Regulations and Export Regulations will, when they are commenced, impose obligations in relation to certain goods that are imported or exported from a RoRo listed location.

      The government has also announced a new Freeports Advisory Panel to advise the Government on the establishment of up to 10 free ports. Four ports are quoted by the Department for International Trade as having shown an interest already but details on how ports and airports will be able to bid for free port status are still to be announced.

      The Department for International Trade suggests that free ports could be free of unnecessary checks and paperwork, and include customs and tax benefits. It also suggests that these zones reduce costs and bureaucracy, encouraging manufacturing businesses to set up or re-shore. It notes that the most successful free ports globally attract businesses and create jobs for local people through liberalised planning laws.

      More information is available here.

      Duty-free shopping

      he Chancellor has announced the return of duty-free shopping with EU countries if the UK leaves the EU without a deal.

      Those travelling from the UK to the EU will not have to pay excise duty on alcohol and cigarettes bought in UK ports, airports and international train stations. Those travelling from the EU to the UK can continue to bring back unlimited amounts if duty has already been paid in Europe, but there would also be the further possibility of buying limited amounts in duty-free shops in the EU without suffering UK excise duties on return.

      Duty-free shopping is already permitted for travellers going to non-EU countries. A consultation will be launched shortly on the Government’s long term duty-free policy.

      The HM Treasury news story is available here

      HMRC impact assessment

      HMRC have published a second edition of the impact assessment for the movement of goods if the UK leaves the EU without a deal, originally published on 4 December 2018. It has been updated to include the impact of the customs, VAT and excise regulations laid before Parliament in January 2019, alongside those laid in November 2018 under The Taxation (Cross-border Trade) Act 2018 (TCTA 2018) and the EU Withdrawal Act 2018 (EUWA 2018). The first edition is available here.

      As the impact of the regulations will cut across customs, VAT and excise, this impact assessment explains how businesses and individuals moving goods across the UK-EU border will be impacted for all 3 tax regimes.

      A third edition of the impact assessment will include the impacts of the further regulations that will be laid in Parliament in February and March.

    • Registration for distance sellers

      Original legislation reference

      Value Added Tax Act 1994, Schedule 2

      Current status

      Schedule 2 sets out the liability of EU distance sellers to register for UK VAT once they breach the distance selling threshold.

      Inbound effect

      VAT registration no longer applies for distance sellers from EU member states. Sales of goods will be treated as imports and subject to import VAT and customs and excise duty as appropriate.

      Outbound effect

      UK distance sellers will either need the EU customer to act as importer which may be commercially unattractive, or act as importer of the goods themselves triggering a liability to register in the customer's Member State. Possibility of making use of 'low-value consignment relief' but many Member States already exclude goods sold by mail order, also see 'Developments' box.

      Commentary

      In the event of the UK leaving the EU without a transitional agreement, distance selling arrangements will no longer apply to UK businesses, however, UK businesses may be able to zero rate sales of goods to EU consumers (where goods are moving from the UK to an EU Member State). UK businesses would need to consider import VAT and customs duties and the cash flow impact these may have.

    • Triangulation

      Original legislation reference

      EU VAT Directive, Articles 42 and 141

      Current status

      A simplified procedure is available for intermediate suppliers where there is an intra-EU movement of goods and the intermediate supplier is already registered for VAT within the EU but not in the customer's country.

      Inbound effect

      Triangulation: Physical movement of goods into the UK will give rise to an importation so simplification not available for intermediate supplier. Intermediate supplier can minimise its compliance obligations by ensuring:

      – Supply 1 is the supply for export
      – The UK customer is the importer of the goods in the UK.

      The VAT Committee has previously confirmed that the intermediary supplier (B) will escape liability to register in Member State 1 where supply 1 (A to B) is made under FOB terms. B’s supply to C may then be made on the ‘high seas’, thus removing any liability to register in the third country.

      Outbound effect

      Where UK Co (B) is the intermediary between an EU supplier (A) and an EU customer ('C) there will be no scope for simplification and UK Co will need to register where the customer is based. However, once registered this will give access to simplification in the future.

      Commentary

      As the simplification provision is only available to businesses registered in an EU Member State and refers to an intra-Community acquisition of goods, it will no longer apply in the event of the UK leaving the EU with no transitional arrangements.

      UK suppliers currently using the simplification provisions may be required to register in each Member State where supplies are made, and potentially charge local VAT.

      Non-UK suppliers selling goods into the UK may have to register for VAT in the UK (if the customer does not act as importer of record and account for the import VAT).

  • Real Estate and Construction

    • DIY house builders scheme

      Original legislation reference

      Value Added Tax Act 1994, Section 35(1) (c)

      Current status

      VAT incurred in a Member State on materials to build a house in the UK can be recovered under the scheme.

      Inbound effect

      VAT incurred in a Member State on materials to build a house in the UK should be recoverable as import VAT rather than as acquisition tax from a Member State.

      Commentary

      In the event of the UK leaving the EU without a transitional agreement, it is expected that the provisions around EU acquisitions in the DIY housebuilders scheme will be removed.

    • Reduced Rate for grant funded installation

      Original legislation reference

      Value Added Tax Act 1994, Schedule 7A, Group 3

      Current status

      Grants are currently available from the EU for the funding of ‘relevant schemes’ for the installation of certain types of heating equipment, of security goods and supplies related to connecting a gas supply.

      Effect

      These EU grants will no longer be available.

      Commentary

      In the event of the UK leaving the EU without a transitional agreement, ‘relevant schemes’ are unlikely to be funded by the EU, although in practice many are already funded by the UK Government.

  • Real Estate goods

    • Reduced rate on energy-saving materials

      Inbound Effect

      The Value Added Tax (Reduced Rate) (Energy-Saving Materials) Order 2019, SI 2019/958 has been published which amends the scope of the reduced rate of 5% VAT for energy-saving materials to ensure that UK legislation complies with EU law.

      The reduced rate will no longer apply to the installation of wind and water turbines but will remain fully available (except on wind and water turbines) for supplies of services of installing energy-saving materials in residential accommodation where the supply is made to a qualifying person (a person who is aged 60 or over or is in receipt of certain benefits), a relevant housing association, or where the residential accommodation is a building or part of a building used solely for a relevant residential purpose.

      Otherwise, the reduced rate will be available (except on wind and water turbines) provided that the value of the energy-saving materials does not exceed 60% of the total value of the supply of installation. If the value of the energy-saving materials exceeds 60%, then only the labour cost element will qualify for the reduced rate (with the supply of the materials being standard-rated).

      Commentary 

      The Order has effect in relation to supplies made on or after 1 October 2019, except supplies paid for before that date and supplies made pursuant to a contract entered into before that date.

      These changes have been made following a decision of the Court of Justice of the European Union as a result of an infraction by the European Commission which held that the scope of the current relief was too wide.

      Further information can be found in our alert.

  • Services

    • BMC services to customers in 'third countries'

      Original legislation reference

      Value Added Tax Act 1994, Schedule 4A, para 16

      Current status

      For the supply of certain services to non-taxable persons established outside the EU the place of supply is where the customer belongs. These services are as follows:

      – Transfers and assignments of copyright, patents, licences, trademarks and similar rights,
      – Advertising services,
      – Services of consultants, engineers, consultancy bureaux, lawyers, accountants, and similar services, data processing and provision of information, other than any services relating to land,
      – Banking, financial and insurance services (including reinsurance), other than the provision of safe deposit facilities,
      – The provision of access to, or transmission or distribution through a natural gas system situated within the territory of a Member State or any network connected to such a system, or an electricity system, or a network through which heat or cooling is supplied. As well as the provision of other directly linked services,
      – The supply of staff,
      – The letting on hire of goods other than means of transport.

      Inbound effect

      The supply by EU suppliers of these B2C services to UK customers should not be subject to EU VAT.

      Outbound effect

      There may be uncertainty as to whether a supply by UK suppliers of these B2C services to EU27 customers is outside the scope of UK VAT – depending on how the existing UK legislation is interpreted/amended.

      Commentary

      This change simply reflects the fact that the UK will become a “third country” for VAT purposes.

      Please note that certain services may be subject to use and enjoyment overrides, these vary depending on the country in question. For information on the UK position, please see the ‘Use and enjoyment provisions’ section below.

    • Specified supplies of services

      Original legislation reference

      EU VAT Directive 169(c); and Specified Supplies Order 1999

      Current status

      The VAT Directive provides for deduction on input tax attributable to exempt supplies such as insurance and financial services where the services are made to persons outside the EU or where the services are closely connected with an export of goods. This is transposed into UK legislation via the Specified Supplies Order 1999.

      In the event of a no-deal Brexit, the Value Added Tax (Input Tax)(Specified Supplies)(EU Exit)(No.2) Regulations 2019, SI 2019/408 would come into force which amends the Specified Supplies Order.

      Please note that if the UK does leave the EU with a negotiated agreement The Value Added Tax (Miscellaneous Amendments, Revocation and Transitional Provisions) (EU Exit) Regulations 2019, SI 2019/513, laid on 8 March will avoid businesses needing to apply for, and HMRC approving, a new PESM thereby reducing the admin burden for both business and HMRC. This is to ensure that businesses with a PESM agreed before the UK exits the EU interpret the wording of their PESM so that, whilst the UK will be outside of the EU, any VAT incurred in relation to UK to UK supplies of financial services will continue to be treated as relating to exempt supplies with no right to deduct.

      Inbound effect

      The proposed UK legislation does not change the VAT treatment of inbound supplies per se, however, it does ensure that UK businesses will not be put at a commercial disadvantage compared to their EU27 competitors.

      Outbound effect

      These new Regulations extend the existing treatment so that, on EU exit, UK businesses will be able to reclaim VAT in relation to specified supplies made to customers in the EU. This brings the VAT treatment of supplies to EU customers in line with the VAT treatment of supplies to customers in the rest of the world. As before, businesses will not be able to reclaim any VAT they pay on the costs of making similar supplies to UK customers.

      Commentary

      The proposed changes to the Specified Supplies Order are intended to ensure consistency between recovery of VAT on supplies made to the EU27 countries and other third countries. It will also mean reciprocity in the VAT recovery treatment of financial supplies made between the UK and EU27 countries.

      In summary, in the event of a no deal outcome, these Regulations will enable businesses to recover input tax under the SSO in relation to supplies made to customers in the EU but will continue to restrict recovery in relation to similar transactions within the UK. There is already guidance on this on in the partial exemption VAT Notice 706 which will be updated where necessary, with any updates made available prior to commencement of the Regulations.

      The treatment of financial and insurance services to EU customers has been the subject of a great deal of interest, with many lobbying for supplies to EU customers to carry a recovery right. These revised Regulations will be welcomed as they level the playing field with EU businesses.

      The Regulations also ensure that a Partial Exemption Special Method (PESM) agreed before the UK exits the EU will be interpreted in accordance with the VAT treatment that will apply under the SSO after the UK exits the EU. This avoids increased administrative burden on both business and HMRC because, otherwise, businesses would need to apply for a new PESM which would require HMRC approval.

    • Use and enjoyment provisions

      Original legislation reference

      Value Added Tax Act 1994, Schedule 4A, paras 3, 7, 8, 9, 9D, 9E

      Current status

      Member States currently apply use and enjoyment overrides on certain services. In the UK, these overrides are applied to:

      – the hiring of means of transport,
      – the hire of goods,
      – broadcasting services,
      – electronically-supplied services (B2B only),
      – repair services under contracts of insurance (B2B only),
      – telecommunication services (B2B only).

      If use and enjoyment provisions are applicable, the ‘normal’ place of supply may be overridden, and the supply moved into or out of the scope of EU VAT.

      Inbound effect

      Potential UK registration obligations for EU27 suppliers of applicable services which are used and enjoyed in the UK.

      Scope for relief from EU VAT to the extent that applicable services are used and enjoyed in the UK.

      Outbound effect

      Potential EU27 registration obligations for UK suppliers of applicable services which are used and enjoyed in the EU.

      Scope for relief from UK VAT to the extent that applicable services are used and enjoyed in an EU27 Member State.

      Commentary

      Member States, on the whole, apply use and enjoyment provisions more broadly than the UK, and not always equally to inbound and outbound supplies.

      There is therefore scope for arbitrage, based on the UK’s narrow application compared to an often broader application in the EU27.

      In the event of the UK leaving the EU, the use and enjoyment provisions adopted in the EU27 states may create additional registration obligations for UK suppliers, particularly where provisions are implemented more widely than in the UK.

  • Tour Operators Margin

    • Tour Operators Margin Scheme

      Original legislation reference

      EU VAT Directive, Article 307

      Current status

      The Tour Operators Margin Scheme (TOMS) provides a simplification mechanism for 'tour operators' removing the need for a VAT registration in the Member State in which the services are actually enjoyed. The components of the 'tour' are treated as a single service subject to tax on the profit margin in the Member State in which the tour operator is established.

      The tour operator has no right to deduct the input VAT incurred on the components of the 'tour'.

      A non-EU tour operator has no obligation to account for EU VAT on its margin.

      Outbound effect

      Based on the new TOMS Regulations (SI 2019/73), a UK tour operator will have no right to deduct (or claim a refund of) the VAT incurred on tour components. However, under current rules, it will have no liability to account for EU VAT on its margin, even if the tour takes place wholly within the EU27.

      As things stand, UK tour operators will gain a competitive advantage after Brexit, with no liability to account for EU VAT even where a tour takes place wholly within the EU.

      Commentary

      Changes to the TOMS should equalise the treatment of UK tour operators with other non-EU operators, and will give them an advantage over EU tour operators, creating a revenue deficit in the UK. This position presents the easiest legislative solution to TOMS after Brexit, and reflects a logical outcome, as it is fair to assume that after Brexit most EU countries would stop taxing the margin on UK holidays. It is important to note, however, that the new TOMS Regulations are premised on a ‘no deal’ scenario and this position may change depending on any deal negotiated between the UK and EU27 Member States.

  • Transport

    • B2C freight transport

      Original legislation reference

      Value Added Tax Act 1994, Schedule 4A, paras 11 and 12

      Current status

      For intra-EU B2C freight transport the place of supply is where transport begins.

      Effect

      Transport between the EU and UK will no longer be intra-EU and so the original legislation will not apply. Instead the place of supply will be in each country the transport goes through. The supply will qualify for zero-rating within the EU but this will not necessarily remove an obligation to register in the countries concerned.

      The value of the transport service will be included in the value on which import VAT is calculated.

      Commentary

      In the event of the UK leaving the EU without a transitional agreement, the supply of freight transport services may be treated as where the journey takes place. There may be an obligation to register in each country through which the transport travels. The value of the transport service will likely be included in the import value.

    • Restaurant and catering services on passenger transport

      Original legislation reference

      Value Added Tax Act 1994, Schedule 4A

      Current status

      For intra-EU transport, the place of supply for restaurant and catering services on board passenger transport is the place of departure. Alternatively, Member States have a simplification option and can exempt the supply of goods for consumption on board.

      Effect

      Transport between EU and UK will no longer be intra-EU so Art 55 of the VAT Directive will apply - the service is supplied where it is physically performed and no simplification is available.

      Commentary

      In the event of the UK leaving the EU without a transitional agreement, the supply of restaurant and catering services on passenger transport may be treated as supplied where the services take place, as opposed to the place of departure.