Farmers and agri-businesses are being urged to get up to speed with changes to import and export VAT and duty obligations to avoid getting caught out.
Though the Brexit deal was intended to allow goods travelling between the UK and the EU to be tariff free, they are subject to VAT and also often to customs duties, which could catch out the unwary, warns Marianne Hawksworth, senior VAT manager at accountant Old Mill.
Ms Hawksworth explained that anyone wishing to trade goods with the EU must apply for an Economic Operators Registration and Identification (EORI) number to avoid delays and VAT issues. “Businesses need this to export and to claim import VAT back, and even if you only occasionally trade with the EU it is still worth obtaining one from HMRC to plan ahead.”
She added that farmers looking at buying machinery and equipment from the EU could avoid the paperwork by seeking a UK distributor “However, this is likely to be more expensive– so weigh up the extra admin against the costs.”
Regular importers looking to defer the VAT and duty costs could also use designated warehousing to hold the goods on UK soil before clearing them through customs, when payments will then be due.
Alternatively, there is the option to defer payment of customs and excise duties through duty deferral, or import VAT using the new Postponed VAT Accounting scheme (PVA) – which is especially useful for managing cashflow. “It’s important to get advice though as each option has different procedures and paperwork,” said Ms Hawksworth.
When using an agent to process customs entries, the buyer must give their EORI and VAT number. The agent then provides HMRC’s details so the buyer can pay duties and VAT immediately – or they can use the agent’s duty deferral account for a small fee, or set up their own.
When using PVA, buyers must ensure they or their agent indicate this on import entries, she stressed. “This allows payment to be made in the VAT return relating to when the import happened – the import VAT claimable is netted off against this – effectively allowing up to four months’ cashflow benefit.”
Buyers also need to know who is responsible for payment of import VAT and duties. “This means understanding the incoterms and contract terms,” explained Ms Hawksworth. For example, if the EU supplier sells goods delivered duty paid (DDP), they are declared as the importer to HMRC. If the buyer is responsible for this, goods may be delivered duty unpaid (DDU) and they then pay the VAT and duty according to the import procedure used.
When exporting goods, sellers should review their trade agreements and determine if they or the overseas business are responsible for paying import VAT and duty on the goods upon entry to the EU destination. In some instances, UK businesses may have to VAT register in the destination country. “VAT registering abroad can be just the tip of the iceberg so do take specialist advice as it will help the business strategy,” said Ms Hawksworth.
“When approaching these new rules, each individual business will need its own approach. Allow your tax adviser to be part of the process as they can help you work toward your business goals without unexpected problems and costs.”