Changes to call-off stock arrangements
A current EU concession that is available to the UK is the process of holding call-off stock. This stock can be held in an EU country and the business holding the stock isn’t required to be VAT-registered. This is because if the customer who will buy the stock is VAT-registered they can account for the stock on their return. However, this is going to come to an end for any British business on the 31st of December.
– An example
A GB business makes bread and has a customer in Ireland. The customer is registered for VAT. A stock of bread is held by the GB supplier and the bread is owned by the business until the Irish business needs it. This means that the supplier does not need a VAT number. When a sales invoice is raised the customer accounts for the bread on his or her VAT return.
As of the 1st of January 2021, the manufacturer’s bread will be subject to import VAT. In addition to this, the bread will also be subject to import VAT when it arrives in any EU country. This means that the manufacturer will need to register for VAT in the country they are selling to. This means they will need to complete a VAT return while also charging for domestic VAT on any future sales.
The Business owner will need to register for VAT in Ireland even if they make less than the VAT threshold. This is because a business located overseas will only have a threshold in its country. It does not account for any supplies that are made in other EU countries.
If an EU business has its supplied made in Great Britain, the exact opposite will apply. This means that the EU business will need to register for VAT here if they have holding stock. Registrations for VAT requests will go live on the 1st of January, 2021. However, registration has been available since the 1st of October 2020.
MOSS returns
Business to customer (B2C) supplies that are involved in telecommunication, broadcasting, and electronic services are currently taxed according to their customer’s country. The Mini One Stop Shop (MOSS) return is how a business pays their tax at the end of the quarter.
Any UK business which makes B2C digital supplies does not need to use MOSS if their annual sales in the EU are less than €10,000. If the sales are less than this amount, the supplier will charge the VAT rate that is applied to their own country, however, as from the 1st of January 2021:
- The €10,000 will come to an end and a zero-threshold will apply
- Any UK business that uses MOSS sales will need to register in the EU country of their choice. They will need to submit VAT-returns and pay tax in the chosen country. An alternative is to register for VAT separately in each EU country. This is where the digital supplies are made.
- The last MOSS return will need to include sales up to the 31st of December 2020. It will need to be submitted by the 20th of January 2021.
Reclaiming VAT That Was Paid in EU Countries
From the 1st of January 2021, particular procedures will change for any UK business that usually reclaims VAT that has been paid in other EU countries.
Until the 31st of December 2020, the VAT was recovered by the business making an online claim. This claim was sent to the tax authorities that were located in the other countries. However, it has been confirmed that businesses can now submit claims up to the 31st of March 2021. This is for the quarter ending in December 2020.
A non-EU business will now need to submit a 13th Directive claim instead. The claims will now need to be submitted to the tax authority on a form. This form will be written in that country’s language. In addition to this, there is the possibility that each EU country will have different deadlines.
– Practicality
For 13th Directive claims, businesses will have to look at a cost versus benefit analysis. Will it be worth spending time on the paperwork and learning another language just so the business can claim €100 of VAT? It might be worth while using a specialist VAT to work on their claim. If the fee is based on a percentage of the VAT as opposed to a fixed amount it could be worthwhile. These VAT changes could be quite difficult to deal with.
The Retail Export Scheme
For years it was possible for retailers to sell their products to visitors who were from outside the EU. This was possible thanks to the Retail Export Scheme. Many well-known tourist destinations were able to promote tax-free shopping for tourists.
The UK Government announced that the Retail Export Scheme will end on the 31st of December 2020. Some businesses along with some trade organizations are putting the Government under pressure to reverse its decision. It is, therefore, possible that the policy may change. Any retailers who use this scheme will have to ensure that everyone they employ is aware of the change. This means that those who work in a shop will now have to deal with customers who will not know that their shopping costs 20% more than it used to.
Triangulation
Let’s imagine that a product is manufactured in Germany and sold to a UK business. The goods are shipped from Germany to a final customer in France. Every single customer is registered for VAT in their country.
Up until the 31st of December, the German supplier will invoice the UK business without charging them any VAT. They do this because the UK business is an intermediary business. The UK business sends an invoice to France without charging them any UK VAT. The French company will deal with their VAT by way of accounting for some acquisition tax and input tax. In addition to this, the EU Sales Lists entries are made using the triangulation code.
As of the 31st of December 2020, the triangulation code will be broken. If the UK business decides to take ownership of the products in Germany or France it will need to register for VAT in either Germany or France. This is because the UK business will be making taxable supplies of goods.
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