Brexit
2 mins | April 25, 2021

Brexit Guide to Clinical Supply

The UK’s relationship with the EU now

All EU laws will cease to apply to the UK and the UK gains the status of a third country in relation to the member states of the EU, much like the United States.

EU VAT Treatment

Double Taxation & Cross-...

Brexit Guide to Clinical Supply

The UK’s relationship with the EU now

All EU laws will cease to apply to the UK and the UK gains the status of a third country in relation to the member states of the EU, much like the United States.

 

EU VAT Treatment


Double Taxation & Cross- border supplies of goods
Pre-Brexit, generally sponsors imported goods into Europe and could move these freely around Europe to clinical trial sites as needed. Post Brexit, supplies and movements of goods between the EU and the United Kingdom are now subject to the VAT rules on imports and exports. This has major impacts on import VAT and excise duties that are payable. In particular for sponsors who previously imported into the UK, and used this as a base for distribution to trial sites across Europe, it’s expected that these goods are subject to import VAT twice. Once on entry into the UK, and once again on entry from the UK into the EU. VAT could equate to approximately 20% of the cost of the goods, and therefore requires advance planning and budgeting.

Cross-border VAT Refunds
UK companies will now have to apply for VAT refunds via the 13th Directive, the reclaim mechanism applicable to businesses based outside of the European Union. The deadline and method by which UK companies apply for cross-border VAT refunds essentially changes post-Brexit. Complete and original documentation will need to be retained and submitted to foreign tax offices.
The same reciprocity rules will be applied by member states to the UK. Simply, if the EU member state can claim VAT from the UK, then the UK can claim VAT from the EU member state.

Brexit and Cross Border VAT Recovery
VAT on cross border services (the EU and outside the EU)
• Buying services from outside the UK - Where reverse charge mechanisms are in place, this remains essentially unchanged. Reverse charge continues to be accounted for on services bought from outside the UK.
• EU companies looking to seek a cross-border VAT refund from the UK have to apply via the 13th Directive mechanism as the EU refund directive no longer applies.

UK-EU Border Controls Post Brexit
From 1 January 2021 the UK has the autonomy to introduce its own approach to goods imported to GB from the EU. Through this transition, new forms and checks will be introduced at the borders which may delay the delivery of goods into the UK. Equally, moving goods from the UK through EU borders will now require new and unfamiliar documentation to be completed, which may strain sponsors and their suppliers as they work to tight trial timelines. In reality, sponsors and their suppliers may face bottlenecks at borders as the ports struggle to manage the importation volumes requiring additional checking.

 


Import VAT Considerations Post Brexit


Import VAT
Sponsors will, however, need to consider some other processes, such as how they will account for import VAT. Any EU registered companies shipping goods to the UK via DDP shipments will incur Import VAT that may have to be claimed via the 13th Directive which is an onerous task. UK sponsors shipping goods DDP to the EU may face the same challenges and should be prepared for either extra foreign VAT registration requirements or more cumbersome VAT reclaim processes.

EORI Numbers
Importers who have been using a single EORI for all imports across the EU will need to now obtain a second EORI number as HMRC has specifically said all imports into the UK must be done using a UK-issued EORI number. This EORI number is not valid for imports into the EU, and thus a second EU EORI number would need to be obtained.

VAT Compliance
It is probable that sponsors and suppliers may need to use a different supply chain model (perhaps sourcing and storing goods such as comparators from a different country to avoid these complications). Changes to the supply chain will inevitably result in new VAT compliance obligations.

VAT Compliance & Fiscal Representation
UK sponsors will need to look into where they may require fiscal representation to remain tax compliant within EU.

These EU countries require a fiscal representative:
Austria, Belgium, Bulgaria, Croatia, Cyprus, Denmark, Finland*, France*, Hungary, Italy*, Lithuania, Netherlands, Poland, Portugal, Romania, Slovenia, Spain, Sweden*.

 

 

VAT refund Tool kit

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