UK businesses with non-EU suppliers selling to the EU
A key issue for UK businesses who source supplies from non-EU countries and make sales directly into the EU will be potential double duty charge, once when goods are imported into the UK and again when a sale is made to the EU.
Being part of the EU Customs Union allows trade among member states to flow tariff free and regardless of which country within the Customs Union imports a product the same tariff applies. After Brexit, the UK may leave the EU Customs Union and until new trade deals are agreed UK businesses will need to comply with Customs related aspects, when selling to EU member states, such as duty rates, trade tariffs, Customs Warehousing, and deferment account guarantees.
UK businesses may lose access to certain EU VAT simplifications post-Brexit, such as ‘supply and install’ and triangulation. As a result, UK businesses may need to register for VAT and file VAT returns monthly, bimonthly or quarterly, and may be required to appoint a fiscal representative in relevant member states.
Where businesses are either storing the goods before what will become a re-export to the EU, or they are carrying out a process on the goods before doing so, special procedures such as Inward Processing and Customs Warehousing could provide significant duty and import VAT savings or improved cash flow, depending on the terms of trade used.
Consideration should be given to contracts and Incoterms to determine who will incur the import duty and import VAT cost upon delivery to the EU.
Contracts should also be considered from a commercial perspective to ensure that they are updated to take account of any fixed prices that could be affected by additional taxes and duties and any time critical supply issues as supplies subject to customs formalities may take longer.
Increased administrative costs are to be expected as goods sent to the EU will no longer be dispatches but are likely to require full export and import declarations.
Companies are also likely to lose access to many current preferential trade agreements with third country suppliers which give lower preferential duty rates at import into the UK.
Brexit means UK businesses would no longer benefit from EU directives which minimise tax leakages caused by WHT. So, without further action, the profitability of contracts may be reduced.
UK businesses should review their contracts for ‘grossing up clauses’ regarding WHT and confirm their eligibility for relief from overseas taxes either under relevant DTAs or the UK’s domestic law.
Depending on the effect of Brexit on business cash flows and profitability, some form of business restructuring may be appropriate including business relocation and migration.
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- Trade tariffs
- Customs Warehousing
- Deferment account guarantees
- Inward Processing Relief
- Fiscal representative
- Import and export declarations
- EU directives and withholding taxes
- Double tax relief
- Business restructuring
- Business relocation and migration