UK companies with EU suppliers selling to the EU
Many UK businesses that have built their business models on access to the EU single market and will have complex EU supply chains involving cross-border movements of components and goods – often back and forth before sale. After Brexit, such cross-border movements are likely to trigger cumulative tax costs.
Establishing an EU holding company for EU supply chain activities and sales within the EU may be appropriate for some businesses. For others, moving distinct operational activity may be required. All business restructuring plans should be based on a detailed analysis of the flow of goods invoices and cash after Brexit.
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.
Moving goods between the UK and EU members states will change from being acquisitions and dispatches and will become exports and imports, potentially liable to customs duties. Import and export declarations are likely to be required and the potential impact on deferment account guarantees will need to be considered.
Customs special procedures such as Customs Warehousing or Inward Processing Relief may benefit businesses who either only store the goods before re-sale, or where a process is carried out before dispatch.
Businesses may also wish to reconsider the location of manufacturing or distribution operations.
Brexit will also mean that UK businesses would no longer benefit from the EU directives which minimise the impact of WHT. Therefore, without further action, net cash received from customers may be reduced and or profit margins may be adversely affected.
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 cash flows and profitability derived from sales to EU member states, UK businesses could consider some form of business restructuring to help minimise WHT, and/ or business relocation and migration.
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- Trade tariffs
- Customs Warehousing
- Fiscal representative
- Inward Processing Relief
- Deferment account guarantees
- Import and export declarations
- EU directives and withholding taxes
- Double tax relief
- Business restructuring
- Business relocation and migration