Main points of attention
- The EU simplification allows a seller to avoid VAT registration in the country of storage if certain conditions are met.
- Due to Brexit, the EU simplification measure applicable to call-off stocks (the ’EU simplification’) ceases to apply for movements of goods between the EU and the UK.
- Brexit transitional rules apply on goods transferred from the UK to the EU or vice versa on the condition that the call-off stock already in the EU or the UK before the end of the Brexit transition period is called off or returned within 12 months.
- The EU simplification will thus continue to apply to these stocks in the EU MSs or in the UK until 31 December 2021.
Uniform treatment applies for cross-border call-off stock arrangements in the EU. If goods are sent to another EU Member State (MS), a VAT registration is not required in this EU MS if certain conditions are met, most importantly an intended acquirer is known and the goods are called off or returned within 12 months.
The EU simplification can thus entail significant savings in VAT compliance costs for businesses who hold stock on call-off basis in another EU MS. Those businesses can avoid the VAT registration and filings in other EU MSs on the conditions that they keep registers of their stock movements (hereafter: a ‘register).
Consequences of Brexit
As of 1 January 2021, the UK will not be bound by the EU VAT and Customs rules (except in respect of Northern Ireland (NI) as regards transactions in goods). Where the UK is referred to below, this only includes the Great Britain since the EU VAT rules continue to apply for transfers of goods from NI to the EU, or vice versa.
The EU simplification no longer applies to UK sellers holding stock in the EU, or vice versa. General VAT and Customs rules are thus applicable for supplies of stock that are transported to the UK from a EU MS, or vice versa after 31 December 2020. However, transitional rules apply if the goods already in the EU or the UK before the end of the Brexit transition period are called off or returned within 12 months.
Goods held in call-off stock in the UK after Brexit
If goods are sent after 31 December 2020 from an EU MS to a warehouse or client’s storage facility in the UK and title of the goods still remains with the seller, a VAT registration is required in the UK.
Any business that imports goods into the UK must now be registered for UK VAT to make a domestic supply in the UK, and to be able to recover any (import) VAT. From 1 January 2021, UK VAT registered businesses are able to account for import VAT on their VAT Return (the Postponed VAT Accounting). This means that in most cases these businesses will be able to simultaneously declare and recover import VAT on their UK VAT returns, rather than paying import VAT at the time that the goods are released for free circulation in the UK.
UK businesses with stock in the EU
The EU call-off stock simplification no longer applies to stock in the EU that is shipped from the UK after the end of the Brexit transition period. UK businesses holding a call-off stock in the EU must register for VAT in the EU. General rules are thus applicable for supplies of stock that are transported to the EU MS from the UK.
Special rules apply to transitional situations: supplies of goods that were transported to the UK from a EU MS or from the UK to a EU MS before the end of the Brexit transition period and are supplied or returned after Brexit.
Under those rules, a VAT registration is not required if goods were sent under EU call-off stock arrangements to the UK from the EU or vice versa before 31 December 2020, and the goods are called off or returned within 12 months. The EU simplification will thus continue to apply to these stocks in the EU MSs or in the UK until 31 December 2021.
EU businesses with stock in the UK
Goods already in UK at the end of the transition period will continue to be subject to the EU call-off stock simplification until the stock is called off or returned to the EU within 12 months.
Consequently, if call off stock was in place before the end of the transition period, an EU business does not have to register for VAT in the UK. However, this only applies if the goods are either called off or returned within 12 months. After this deadline, the EU business needs to return the goods or register for VAT in the UK if it wishes to keep the inventory stored and sell it in the UK.
UK businesses with stock in the EU
If call off stock was in an EU MS before the end of the transition period, the UK business does not have to register for VAT in this EU MS. However, this only applies for the stock called off or returned within 12 months. After 31 December 2021, the EU simplification does not apply anymore on this call-off stock. If an UK business wish to keep the inventory stored in the EU MS, it will have to register for VAT in that EU MS or return the goods.
Compliance Guidelines by the Dutch and UK Government
The Dutch Ministry of Finance and the UK tax authorities (HMRC) have already issued detailed guidance how the reporting should be done in the Netherlands or in the UK regarding the transitional situations. Please let us know if you would need to know more details.
Other returns of goods after Brexit
Where the goods are returned from an EU to the UK or vice versa, this return now qualifies as an export in the EU and importation in the UK or vice versa. The import is subject to VAT and possibly customs duties and other taxes unless special treatment applies. Please read more details about returns of goods and possible Returned Goods Relief in our article “Brexit and exemption Returns of Goods”.