Great Britain officially left the European Union on 01.2.2020. The end of the current transition period is imminent with the date of 31.12.2020. Therefore, all companies that are in business exchange with customers/companies in the UK are required to deal with the necessary tasks in the business solutions used, such as Microsoft Dynamics NAV / Dynamics 365 Business Central.
With the date of the UK's actual exit from the EU, the country is no longer part of the common territory of the European Union. This necessitates fundamental changes for companies whose focus is on the delivery of goods and services to and from the UK. The reason for this is the VAT System Directive and other EU directives that can no longer apply.
From a VAT perspective, the UK's withdrawal from the EU will essentially have the following effects:
Deliveries of goods to Great Britain
Deliveries of goods from the time of the UK's withdrawal are no longer intra-Community deliveries, but export deliveries to third countries. The decisive factor here is the time of commencement of the transport or dispatch. The time of (later) invoicing is irrelevant. This means that supplies of goods which, for example, begin before the date of withdrawal and where the goods of the supplies do not reach the recipient until after withdrawal are still classified as intra-Community supplies.
Purchases of goods in the UK
Movements of goods from the UK to Germany after the date of withdrawal are no longer intra-Community acquisitions but imports for which - subject to any exemptions and simplifications - customs duty and import VAT are generally payable. Deliveries of goods that begin before the UK leaves the EU are still considered intra-Community acquisitions in the country of destination (cf. point 1).
Intra-corporate movements of goods to and from Great Britain
Transfers of goods from one part of the same legal entity in the UK to another part of the same entity in Germany and vice versa are no longer to be qualified as intra-Community transfers and in future are to be treated or declared in accordance with the underlying customs regulations.
Services
For services to companies based in Great Britain, proof of entrepreneurial status must in future be provided by means of "other" evidence and no longer on the basis of the VAT identification number. Other evidence includes, for example, a confirmation from the UK tax authorities (HMRC) that the VAT business status is given.
Input tax refund procedure
As of the day of the UK's withdrawal from the EU, the legal provisions for third countries are also relevant for the application of the input tax refund procedure. This means, among other things, that the application deadline would be reduced to 6 months (30 June of the following year) and that the 9-month deadline for EU-based companies would no longer apply.
Customs implications
As a general rule, the direct application of the European Customs Code (or, as of 1 May 2016, the Union Customs Code) will cease as of the date of withdrawal. If customs duty is due for the delivered goods, it must be checked whether this expense can be reduced through corresponding authorisations, use of customs warehouses and/or changed tariff classifications. Since customs expenses are not deductible (like input tax, for example), there is an urgent need for action by the companies concerned. Otherwise, the additional expense would have to be taken into account in pricing.
Other declaration obligations
Deliveries of goods to Great Britain and services to companies based in Great Britain no longer have to be declared in the recapitulative statement. Likewise, no Intrastat declarations need to be submitted for goods deliveries when the respective declaration thresholds are exceeded.
This article is not legal advice and cannot replace it.
Further information and a checklist can be downloaded from the European Commission here.
Our specialists will be happy to answer your questions about details and adjustments that need to be taken into account in your Microsoft ERP solution.
TSO-DATA GmbH
Jan Grundmann
businesscentral[at]tso[dot]de
+49 (541) 1395-747
