New UK VAT rules from 1st January 2020 – 4 Quick Fixes for EU trade will apply to all EU supplies of goods affecting all EU businesses including the UK (well, at least for the time being). The changes are nothing to do with Brexit but rather aim to iron out and simplify a lot of the procedural differences that cause cross-border havoc in terms of call-off stock; chain transactions; documentation and VAT number checks.
The introduction of standardised treatment for call-off stock/consignment stock relief and for chain transactions in all EU states will certainly be very welcome not least as it will allow UK businesses to implement the same process across all of the EU.
With so much going on politically it is easy to feel the only thing to do is carry on as usual until the whole Brexit situation is resolved. Unfortunately, for many, this would be a mistake as the 4 quick fixes could affect a great many cross-border EU supplies.
The good news is it’s not too late to work out what the changes will actually mean for EU trade on a day-to-day basis. A good place to start is to look at each of the ‘fixes’ and see where these ‘bite’ on current B2B trading arrangements and decide what needs to happen next.
You should look at:
1. All call-off stock arrangements
where goods are shipped into storage in another EU state for later adoption by a specific customer. The problem with call-off stock is that title in the goods remains with the supplier until the goods are called off by the customer. This means that under normal rules the supplier has to register for VAT in the member state where the goods are held. Helpfully some EU states have applied a call off relief whereas unhelpfully others insisted on the supplier being registered.
The 1st Quick Fix is a welcome change by standardising call off stock relief across the whole EU. Where the conditions are met the VAT treatment for call-off arrangements will become more predictable with the need for multiple VAT registrations removed. This affects ECSL’s where you can now enter a customer VAT number without a corresponding value by way of three addtional codes as set out in HMRC’s updated guidance – read more here.
2. EU chain transactions
involve both cross-border movements of goods and three or more parties. Previous irregularities across the EU have led to uncertainty and exposures in terms of VAT accounting and registration obligations.
The 2nd Quick Fix will harmonise how chain transactions should be categorised which may affect VAT registration and accounting for all of the parties in the chain.
3. Documentation
requirements concerned with proving that goods have moved from one EU state to another have differed from state to state which has caused arguments and created unnecessary costs.
The 3rd Quick Fix specifies the evidence required so that the same process and procedure can be applied to all EU supplies.
4. VAT number checks
is an important change as it removes VAT relief where an EU customer does not provide a valid VAT number.
The 4th Quick Fix will limit zero rating to those supplies where the customer provides a valid VAT number and the EC Sales Lists are correctly filed. Given that VAT would fall due if these requirements are not met, and that is irrespective of whether the customer will pay the VAT charge, it will be vital to ensure customer VAT numbers are collected and validated before the supply is made and invoiced.
As ever the devil is in the detail with these 4 Quick Fixes for EU trade and we are always here to help so please get in touch if you need anything.