29th October 2020Countdown to Brexit: Top 6 tax issues businesses should be thinking about

BREXIT is fast approaching on 31^st December 2020 and although a comprehensive trade deal may be agreed prior to that date, at this point in time a No Deal is looking most likely.  If they have not already done so, businesses urgently need to assess the tax impact on their businesses that are likely to take effect from 1^st January 2021.

VAT and Customs

1. Obtain and activate an EORI number

An EORI (“Economic Operators Registration and Identification”) number is basically your VAT number with three zeros added at the end. You need one of these to import or export goods as this is the number that is used on the Customs Declaration completed on entry/exit of the goods.

2. Check your Incoterms with EU customers

Incoterms are the agreed sale/delivery terms which specify who is responsible for paying Duty/shipping/insurance on goods.  If you are selling goods to EU customers, then, depending on the incoterms, you may have to pay additional Duty and VAT when the goods enter the EU.

3. Check your Incoterms with EU suppliers

If you are buying goods in the EU that you wish to import into the UK, then, depending on the incoterms, you may have to pay UK import VAT and Duty on those goods following Brexit.

4. Consider joining the Duty Deferment Scheme

Regular importers of goods from the EU may wish to consider joining HMRC’s Duty Deferment Scheme.  This allows Duty paid on entering goods into the UK, which must be paid to HMRC up front, to be deferred until the 15th day of the following month if the Duty is covered by a bank guarantee.  It’s worth noting that it currently takes about 2 months to join.  However, HMRC have said that they will shortly publish some details about a new simplified scheme where no bank guarantee is required.

Corporate tax

5. Withholding tax

Companies may currently be relying on the EU Parent Subsidiary Directive for reduced withholding tax rates on dividends, interest and royalties.  EU directives may no longer apply from 1^st January 2021, in which case companies will need to rely on the UK’s tax treaties with individual EU countries.  Companies should check how these tax treaties impact them and any actions they need to take to mitigate cashflow impacts and potential withholding tax cost.

6. EU/EEA business operations

If not already done so, companies should look at how they operate within the EU/EEA area post-BREXIT. In particular, regulated businesses and overseas headquartered businesses using the UK to service the EU/EEA markets, should look at the optimum corporate structure post-BREXIT to ensure tax efficiency.

If you need advice and support on anything discussed please contact:

Jason Steinberg – H W Fisher Corporate Tax Partner

Mike Block – H W Fisher VAT Principal