Prior to Brexit, moving goods from Germany to the UK was seamless and simple. Now, trade involves significant complexity and red tape, as well as potentially substantial upfront costs.
German companies are now required to pay VAT and duties on imports into the UK, and fill out customs forms and other supporting documentation. However, there are effective options to reduce costs, mitigate the cash flow effects and effectively manage all the forms and bureaucracy.
The good news is that exporting to the UK can be greatly simplified with expert assistance and advice.
Let’s consider a couple of scenarios to see how this would work in practice.
Scenario one: Upfront customs declaration
In this scenario, you are a company based in Germany that wishes to export goods to the UK.
You have considered the post-Brexit import requirements and duly arrange to pay duties (where applicable) and import VAT up front, and you provide a full and complete customs declaration.
That sounds simple enough on paper. In reality, there are a number of potential pitfalls.
First, you are required to pay duties and VAT at the point of entry, before your goods get to market and prior to any potential VAT rebate. The negative cash flow effects can be considerable.
At the same time, you need to ensure you have processes in place to recover import VAT within the prescribed time, or forfeit the opportunity. (If you are not registered for UK VAT, you will need to reclaim vat via the UK 13th Directive equivalent mechanism).
Second, customs processes are complex. You need a valid EORI number and correct customs codes, plus all supporting information and documentation. Your declaration must be accurate and complete, or your goods will not be released by customs.
In addition, in order to take preferential trade, you need to comply with complex paperwork. For example, securing tariff-free trade entails demonstrating that rules of origin criteria have been met.
At best, the situation is non-optimal from a cash flow perspective. At worst, your goods could get held up at the border, you could lose an opportunity to reclaim import VAT and you might even end up paying for duties when you might have avoided them.
Scenario two: Delayed declarations
There are other import options that will be more effective and efficient for many businesses that trade between Germany and the UK.
Consider a second scenario. A German firm approaches a VAT IT consultant with concerns about the cash flow impact of paying VAT and duties on entry. The firm is also concerned about the complexity of customs procedures. After all, any omission will result in costly delays.
In this scenario, the consultant tailors an import solution that ensures goods pass customs quickly, that VAT and duties are deferred, and that VAT is reclaimed. Here are some of the mechanisms that come into play.
The UK allows for delayed declaration of goods from the EU. That means you only need to provide customs information to HMRC up to six months after import.
The delayed declaration also means that you will not be required to pay import VAT at the point of entry. Using the UK’s Postponed VAT system, you can account for import VAT when you file your tax returns.
HMRC also allows companies to open a duty deferment account, which enables you to pay duties tariffs on all your consignments in a single monthly payment.
However, in order to take advantage of Postponed VAT accounting, you need to be registered for VAT in the UK.
Conditions also apply to duty deferment. The facility only applies to ordinary goods. Also, HMRC can exclude a company from eligibility if it has a history of non-payment.
VAT IT can effectively manage VAT registration and compliance for you, and advise you on the most optimal compliance strategy.
Customs procedures are complex. Each consignment will require different customs codes and supporting paperwork.
That’s why VAT IT carefully considers each client’s product lines and strategic requirements. Following a careful consultation, we will do some or all of the following, depending on the importer’s requirements:
It’s an end-to-end solution that effectively manages red tape, optimises cash flow and reduces all unnecessary costs.
Never miss out on a chance to reclaim VAT. We’ll customise a trade solution that eliminates delays and free up cash for productive use. Get in touch with a VAT IT to learn more.
How to claim back your VAT from the UK
Download this comprehensive checklist to give your business the best shot at claiming VAT on T&E, A/P and Import costs successfully from the United Kingdom.