VAT Quick Fixes relating to EU border trade - is your business prepared?
29th November 2019
A draft bill has been approved to simplify the cross-border supply of goods, also known as VAT ‘Quick Fixes’, from January 2020.
As part of the European Commissions’ Action Plan on VAT, the bill will look to simplify the VAT rules that each country applies to the movement of goods across its respective borders. Businesses involved in cross border transactions, or those that are part of intra EC supply chains, may be affected.
Consequently, four quick fixes are being introduced which we have outlined in this blog. Failure to comply with these new rules could result in a VAT payment due to HMRC, where previously VAT would not be due.
Simplified treatment of call off stock
To speed up the supply of goods to customers in other EU countries, suppliers may ship their own stock to a customer’s premises so that the customer can take from this stock as and when required. This would usually require the supplier to register for VAT in the country where the ‘call off stock’ is held, and to account for acquisition VAT and domestic VAT on the in-country supply. In most EU countries, simplification rules already apply in respect of movement of goods going into ‘call off stock’, however the application of these rules differ from country to country.
From January 2020, the potential requirement to register for VAT will no longer apply, provided that the goods are “called off” by the customer within 12 months of the dispatch of those goods.
Uniform rules to simplify chain transactions
Currently, the only transaction in a supply chain involving two or more parties that qualifies for zero rating is the section involving the transport of goods. However, the identification of this can, in some instances, be difficult.
After the Quick Fixes are applied from January 2020, the zero rating will apply only to the first step in the supply chain (i.e. A to B) where the same goods are supplied successively between different parties located in different member states, even where the goods are transported from A to C.
VAT Identification Numbers
Under current VAT rules, a business may apply the zero-percentage rate of VAT to an intra-community supply of goods, when a certain number of conditions are satisfied. Under the rule, a customer VAT number will now become a substantive requirement for zero rating of intra-EU supplies.
The new rule requires a supplier to note their customer’s valid VAT identification number on the invoice and to report the transaction on an EC sales listing. Failure to comply with both changes will mean that the intra-community supply will not qualify for zero rating.
Proof of transport between EU member states:
To ensure that evidential requirements across the EU are aligned processes will be further formalised, requiring documentary proof that supplies have been transported from one EU member state to another.
Where the supplier has been responsible for the transport (or arranging the transport), they must have two items of evidence such as bills of loading, airfreight or invoice from the carrier. If the supplier only has one piece of evidence, they can alternatively provide evidence of the transport being insured which may be sufficient to support zero rating.
If the purchaser has arranged the transport, the supplier will require a detailed written statement from the purchaser of the goods plus at least two evidential items set out above.
It is crucial to reference Brexit in this article, as the requirement for UK businesses to comply with these EU Quick Fixes may only apply from 1 to 31 January 2020, should the UK leave the EU with no deal, or even longer if we enter into a period of transition. However, this could impact other transactions taking place elsewhere in Europe but not coming into the UK.
At HB&O, we are able to offer a review of your current intra EC transactions to ensure that you put in steps and processes to ensure that you remain compliant after 1 January 2020. Contact our VAT team on 01926 422292 or email Jessica.Mason@hboltd.co.uk for more information.