Businesses need to take heed of some key processes when planning or engaging in trade with the EU, says MARTIN KEENAN
Problems faced by Scottish Seafood businesses trying to deliver their products to EU customers have been described by government ministers as “teething problems”.
But this significantly understates the challenging issues that many food businesses are having to address.
They need to tackle a complex web of new rules and procedures and mistakes could be costly.
Most rules and procedures relating to the movement of goods from the UK to the EU fall within the remit of Customs and Excise and include VAT.
It is important to note that if they are not dealt with in an accurate and timeous manner it can lead to unexpected costs, charges and at worst, penalties.
Fortunately, in spite of the problems, a number of Scottish seafood businesses have persevered and successfully delivered their shellfish to EU markets.
However, there are many others that will be struggling with a new and complex regime. Rumours that a compensation scheme is being considered will be welcomed by many Scottish seafood businesses.
There ares six key areas that all businesses should be aware of when planning or engaging in trade with the EU:
- Incoterms and delivery terms. These are the terms between suppliers and customers that determine who is responsible for matters such as delivery of the goods and for export and import formalities. Although this should be a negotiation between supplier and customer, there are examples of some large logistics providers urging UK suppliers to deliver on DDP incoterms (Delivered Duty paid) because the freight will be sent to the EU on “Groupage” (e.g. where multiple different suppliers goods are grouped together on one truck). There is a clear commercial reasoning for this from the logistics providers’ perspective, however, it is important that UK suppliers understand the VAT and Customs consequences of supplying on DDP terms.
- EORI number (short for Economic Operators Registration and Identification number). UK suppliers will need a UK EORI number to export goods from the UK. If the UK suppliers are responsible for importation of the goods from the EU, then they will also need an EU EORI number. These EORI numbers are required in advance of the export/import declarations.
- EU Import VAT. Although the supply and importation of Seafood is zero rated in the UK, many EU countries do not share the same zero-rated status. Therefore, if UK suppliers are responsible for importation of the goods in the EU, then they can be expected to pay import VAT in the EU.
- EU VAT Registration. Where a UK supplier is responsible for importation of the goods in the EU, then it may be required to register for VAT in the countries of importation or delivery. A consequence of VAT registration is that UK suppliers may need to charge Output VAT on their supplies, depending on local rules. Once VAT registered, import VAT can normally be reclaimed through submission of the VAT returns. It is also possible to apply for simplification schemes such as Postponed VAT Accounting to neutralise import VAT and support cash flow.
- Customs Declaration will be required. This service is normally performed by a Logistics Agent if freight and delivery of the goods is outsourced – or by a Customs Agent if suppliers have their own in-house fleet of vehicles for deliveries.
- Customs Representative. UK Companies should ensure they have the correct type of representation from their logistics and customs agent. Some EU countries require businesses established outside the EU to have an ‘Indirect Representation’ for customs purposes, whereas others may permit “Direct” Representation. Noteworthy is that being an indirect representative will mean that agents have joint and several liability over import VAT and Duty. Customs agents may therefore be reluctant to provide an Indirect Representation due to the shared risks.
Bbusinesses concerned about the new rules and procedures to seek advice as soon as possible.
We have been supporting our clients by undertaking supply chain reviews, to determine the most efficient EU VAT registration model.
Although multiple VAT registrations may be required for some businesses, it may be possible to register for VAT and EORI in one EU country, to allow goods to be imported into the EU and distributed into other EU countries.
Martin Keenan, is a cross-border VAT specialist at Azets in Scotland
This article appears under the terms of the DB Direct service