The advent of Brexit has revolutionized the dynamics with which companies outside the Channel will have to interface with the United Kingdom. The biggest changes concern the import/export of goods and the consequent tax and customs obligations with which European companies will have to interface.
Generally speaking, these changes, which will be described below, will lead European companies to reorganize their relationships with the United Kingdom. These changes came into force from 1 January 2021, the date which marks the end of the transition period and the departure of the United Kingdom from the European Union, resulting in the introduction of a customs border between the UK and the EU. Operations between the EU and the United Kingdom will no longer be intra-community and will be configured as customs exports/imports with a foreign country, with the exception of Northern Ireland, which will essentially continue to belong to the community customs territory, while at the same time being part of also within the VAT territory of the United Kingdom.
A non-UK person who intends to import his goods into British territory will have to verify, based on the requirements highlighted below, the possible possibility of obtaining a tax identification from HMRC (British Revenue Agency). Identification generally involves a VAT (VAT) registration and a UK EORI number. It will allow the customs clearance of the goods and the possible sale with the application of British VAT. There will also be mandatory VAT and EORI registration if the foreign entity wishes to store the goods in Great Britain before sale.
The new provisions will not apply to Northern Ireland. The agreement signed between the UK and the EU provides that Northern Ireland (NI) can continue to be part of the EU territory. Companies based in NI will have an ISO code ‘XI’ which is different to the old ‘GB’. The new suffix Furthermore, the same European B2C rules for distance selling will remain in Northern Ireland with a limit of £70,000 until 1 July 2021. From 1 July 2021 the new European rules relating to distance selling will apply. OSS (One Stop Shop), which will effectively eliminate distance selling and will allow European companies (Northern Ireland included but Great Britain excluded) to integrate B2C sales through an additional VAT declaration in their country of reference.
The new regime covers Great Britain (excluding Northern Ireland) and focuses on several guidelines, which will change the way VAT is collected on sales of goods in the following circumstances:
- Transfer of goods from a foreign entity or from an OMP (Online Market Place) to a British entity. The goods are located outside Great Britain (therefore outside the point of sale) and the supply involves the subsequent importation of the goods into Great Britain.
- Transfer of goods from a foreign entity with an OMP facilitating the sale. The goods are located in Great Britain (therefore already at the point of sale).
- Threshold of £135 for the value of shipments to Great Britain or for goods present within British soil and the possible involvement of the OMP in any sale.
- B2B (Business to Business) or B2C (Business to Consumer) sales depending on the thresholds and rules specified above.
The new regime will also see the abolition of Low Value Consignments Relief, which eliminated import VAT on shipments of goods valued at £15 or less.
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Contents by: Michele Ammirati and Sergio Schittone