On 13 July 2020 the UK government published its Border Operating Model document, setting out how imports and exports in the UK will be managed from 1 January 2021. This document made it clear that whether there is a deal or not, some changes will be forthcoming regardless and organisations need to start making steps to manage them now.
We have listed below five ‘no remorse’ actions that organisations should be undertaking to help them prepare:
Economic Operator Registration Identification (EORI) numbers will be needed to make imports and exports. At the moment an EORI can be used to facilitate transactions across the EU. From 1 January 2021 it will be necessary to have separate UK and EU EORI.
Understanding or reconfirming legal and physical supply chains will help to pinpoint where changes will occur. For example, an existing intracommunity acquisition will become an import. It will therefore be necessary to make sure that the right documentation is in place to manage that and a decision taken as to whether the supplier or customer will act as the importer.
Even if a trade deal is agreed between the EU and UK, goods flowing from one location to the other will need to be accompanied by customs documentation. Commodity codes are required on these documents and will determine (where applicable) duty costs. Getting these wrong could result in irrecoverable costs and incorrect documents.
If a UK business incurs VAT in another EU Member State where it has no obligation to be registered it can recover that VAT via the Refund Directive. From 1 January 2021 any such claims will have to be made using the more burdensome 13th Directive mechanism. This requires direct applications, use of local languages and often submission of original documents. Different timescales add to the complexity. Not claiming amounts of VAT may increase costs hence a need to transfer the recovery position to protect existing amounts of VAT.
Currently UK businesses do not need to appoint a fiscal representative to manage VAT numbers they hold across the EU. This situation will change after Brexit with some Member States insisting UK businesses obtain fiscal representation. This will increase costs and administration, so a review to confirm if the numbers are still required needs to be undertaken.
At the time of writing there is just over five months of time to prepare for these changes. The sooner steps are taken to manage the transition, the smoother it is likely to be. Crowe is here to assist with these changes, including with access to Crowe Global member firms across the EU who can provide local input from the 'EU side' as required.
To discuss how Crowe can help please contact Robert Marchant, Rob Janering or your usual Crowe contact.