UK businesses with UK suppliers selling to the EU
Whether making B2B or B2C sales directly into the EU, UK businesses with a UK supply chain are currently exempt from many of the administrative burdens normally associated with exporting.
Leaving the EU may involve leaving the EU Customs Union which allows trade among member states to flow tariff free. After Brexit, UK businesses may need to comply with Customs-related rules when selling to EU member states. This includes paying duties, trade tariffs, Customs Warehousing, and deferment account guarantees.
UK businesses will lose access to the VAT simplifications such as the EU ‘one stop shop’ mechanisms and triangulation. As a result, businesses may need to file VAT returns monthly, bimonthly or quarterly in up to 27 further countries to ensure their customers are not adversely affected. In addition, although Intrastat and EC Sales Lists will no longer be required, businesses trading goods will need to complete additional import and export declarations. Brexit may also mean that UK businesses will no longer benefit from the EU directives which minimise the impact of WHT. Therefore, without further action, net cash received from customers may be reduced and/or profit margins may be adversely affected.
UK businesses should review their contracts for ‘grossing up clauses’ regarding WHT and confirm their eligibility for double tax relief either under relevant DTA or the UK’s domestic law. Depending on the cash flows and profitability derived from sales to EU member states, UK businesses could consider some form of business restructuring to help minimise customs duty and VAT if this is an issue.