VAT return boxes change in case of a no-deal Brexit

VAT return boxes change in case of a no-deal Brexit

To be honest, we were quite relieved when we heard that Britain’s decision on how to leave the EU had been postponed again. Admittedly, there is a good chance to walk a well-paved path to leave the EU with a deal and with enough time (until the end of 2020) to cope with all the changes. However, a hard Brexit is still not unlikely. While many of you may still be in the process of (further) preparing for what ‘May’ happen, we would like to put forward the following question: To what extent have you prepared for changes in the VAT boxes on your (UK) VAT return in case of a no-deal Brexit?

Postponed Accounting Scheme

In order to avoid a serious cash-flow impact on businesses after a hard Brexit, HMRC has established a Postponed Accounting Scheme. This regulation allows for payment of VAT on imports (EU and others) to be postponed instead of becoming immediately due after clearance of the goods. As a result, VAT has to be reported in a different way:

  • Box 2 will include VAT on imports (!) accounted for through postponed accounting
  • Box 4 will include VAT reclaimed on purchases, imports and other inputs
  • Box 8 contains the total value of all exports (!) of goods exclusive of VAT
  • Box 9 contains the total value of all imports (!) of goods exclusive of VAT

You may want to read the HMRC Guidance: https://www.gov.uk/guidance/accounting-for-import-vat

As with VAT on import for other (non-EU) countries, it is the custom value (item value + import duty + transport costs, etc) that forms the basis for VAT, instead of the value of the goods as presented on the AP invoice. We have noticed that this is a relatively difficult process to automate and most companies are taking the invoice value of the goods as a basis for the VAT. We, and other EBS users along with us, would really appreciate your thoughts on how you will automate this changed VAT reporting requirement in case of a no-deal Brexit. Meanwhile, let’s all hope it won’t come to that.

Please send remarks, observations and questions on how to handle these changes in Oracle’s E-Business Suite to: Henk Tiesma, h.tiesma@4apps.com or call +31 646 178 187.

Users of itax4apps will be provided with the (reporting) adjustments as part of their service contract

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