Indirect tax and brexit

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

3. Introduction What is Europe?

4. EUROPEAN UNION United Kingdom Ireland Austria Cyprus Netherlands Croatia Finland Belgium Bulgaria Slovenia Romania France Luxembourg Italy Czech Republic Lithuania Spain Malta Germany Denmark Greece Latvia Hungary Slovakia Poland Portugal Estonia Sweden

5. EUROPEAN UNION United Kingdom Ireland Austria Cyprus Netherlands Croatia Finland Belgium Bulgaria Slovenia Romania France Luxembourg Italy Czech Republic Lithuania Spain EURO ZONE Malta Germany Denmark Greece Latvia Hungary Slovakia Poland Portugal Estonia Sweden

6. EUROPEAN UNION United Kingdom Ireland Austria Cyprus Netherlands Croatia Finland Belgium Bulgaria EU CUSTOMS UNION Slovenia Romania France Luxembourg Italy Czech Republic Lithuania San Marino Spain EURO ZONE Andorra Malta Germany Denmark Turkey Greece Latvia Hungary Monaco Slovakia Poland Portugal Estonia Sweden

7. EUROPEAN ECONOMIC AREA Liechtenstein EUROPEAN UNION Iceland Norway United Kingdom Ireland Austria Cyprus Netherlands Croatia Finland Belgium Bulgaria EU CUSTOMS UNION Slovenia Romania France Luxembourg Italy Czech Republic Lithuania San Marino Spain EURO ZONE Andorra Malta Germany Denmark Turkey Greece Latvia Hungary Monaco Slovakia Poland Portugal Estonia Sweden

8. EUROPEAN ECONOMIC AREA Switzerland Liechtenstein EUROPEAN UNION Iceland Norway United Kingdom Ireland Austria EUROPEAN FREE TRADE ASSOCIATION Cyprus Netherlands Croatia Finland Belgium Bulgaria EU CUSTOMS UNION Slovenia Romania France Luxembourg Italy Czech Republic Lithuania San Marino Spain Andorra EURO ZONE Malta Germany Denmark Turkey Greece Latvia Hungary Monaco Slovakia Poland Portugal Estonia Sweden

9. EUROPEAN ECONOMIC AREA Switzerland Liechtenstein EUROPEAN UNION Iceland Norway United Kingdom Ireland Austria EUROPEAN FREE TRADE ASSOCIATION Cyprus Netherlands Croatia Finland Belgium Bulgaria EU CUSTOMS UNION Slovenia Romania France Luxembourg Italy Czech Republic Lithuania San Marino Spain EURO ZONE Andorra Malta Germany Denmark Turkey Greece Latvia Hungary Monaco Slovakia Poland Portugal Estonia SCHENGEN AREA Sweden

10. EUROPEAN ECONOMIC AREA Switzerland Liechtenstein EUROPEAN UNION Iceland Norway United Kingdom Ireland Austria EUROPEAN FREE TRADE ASSOCIATION Cyprus Netherlands Croatia Albania Finland Belgium Bulgaria EU CUSTOMS UNION Bosnia Herzegovina Slovenia Romania France Luxembourg Serbia Italy Czech Republic Lithuania San Marino Republic of Kosovo Spain EURO ZONE Andorra Malta Moldova Germany Denmark Turkey Greece Macedonia Latvia Hungary Monaco Slovakia Montenegro Poland Portugal COUNCIL OF EUROPE Estonia SCHENGEN AREA Sweden Armenia Russia Azerbaijan Georgia Ukraine

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

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

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

14. Case study Shoe importer exploring Brexit impact and mitigation

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

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

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

18. What are the VAT implications of Brexit?

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

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

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

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