In spite of the talks ongoing, we are still leaving the EU on the 31st December 2020. What does this mean for your SyscomERP™ solution?
Do you ship to business in the current European countries?
If you do and your carrier is interfaced to SyscomERP, have they advised you of any changes they require such as adding Custom’s details to the output file. This also applies to any shipments to Northern Ireland as that will be treated as part of the EU in this respect.
Do you have a 10-digit commodity code held in SyscomERP against each finished item?
Does your version of SyscomERP allow for 10-digit commodity codes? Please try changing one in the Item Maintenance function now. If 10 digits aren’t allowed, then please raise a support call with details of the error message you received.
After the end of the transition period on 31 Dec 2020 next, there will be no distinction between goods being imported from the EU and goods being imported from outside the EU; they will all simply be goods being imported into the UK. This will mean that all goods would revert to being treated in the same way as goods being imported from outside the EU (i.e. they will have VAT and Duties levied when they enter the UK).
However, the implications could be significant due to hold-ups at customs having supply chain and cash flow implications on many businesses. To prevent this, HMRC will be introducing a new system called ‘postponed VAT accounting’. Under the new system, a VAT registered business will not have to pay the VAT on import and later reclaim it on a VAT return. Instead will simply account for the VAT on their VAT return in much the same way as imports from the EU under the reverse charge system currently operating (although there will be no entry in box 8 of the return).
The postponed accounting or VAT will be applicable when a VAT registered business imports goods into:
- Great Britain (England, Scotland & Wales) from anywhere outside the UK
- Northern Ireland from outside the UK and the EU (currently there will be no changes to the treatment of VAT for movement of goods between Northern Ireland and the EU)
There is no need to get authorisation to apply the postponed accounting; you can simply do it if:
- the goods you import are for use in your business and
- you include your EORI number starting with ‘GB’ on your customs declaration
- you include your VAT registration number on your customs declaration if it’s needed
EORI stands for European Union Registration and Identification number. As you can see from the second point above, businesses must include their EORI number as well as their VAT number on the customs declaration when making an import. As such, it is very important that a VAT registered business that doesn’t already have one, should register for an EORI number at https://www.gov.uk/eori as a matter of urgency before the end of this year. The process is quite simple and takes no more than 10 minutes online plus the time it takes HMRC to respond by return email. This is a process we advise you to do today.
How does this get reported on our VAT return?
After the goods have been imported, it will be necessary to account for import VAT on the next VAT return. An online monthly statement will be available to download and keep for the business records. This will show the total import VAT postponed for the previous month that should be included on the VAT return.
Due to postponed accounting, there will be changes to how the VAT return should be completed:
- Box 1 must include the VAT due in the period on imports accounted for through postponed VAT accounting.
- Box 4 must include the VAT reclaimed in the period on imports accounted for through postponed VAT accounting.
- Box 7 must include the total value of all imports of goods included on the online monthly statement, excluding any VAT.
For businesses that are eligible to defer their customs declarations (for example, where the business makes supplementary declarations), import VAT must be declared on the VAT return which includes the date that the goods were imported. To complete the boxes on the VAT return, it may be necessary to estimate the import VAT due from the records of imported goods.
When submitting a deferred declaration, the next online monthly statement will show the amount of import VAT due on that declaration. It should then be possible to adjust any previous estimate and account for any difference on the next VAT return.
One solution to this is to post all the VAT transactions as normal then do a reversal at the end of the month out of that tax code / GL code into a suspense account using the VAT options in the SyscomERP GL Journal function. The VAT 100 report in SyscomERP would then be correct. For the next month, you would then repost the postponed VAT back to the tax code and GL code, journaling it out of the suspense account and back to the VAT GL. It will then be shown on the next VAT 100 report.
If there are any concerns or confusion please contact Graeme Winterburn, Software Manager (firstname.lastname@example.org), for further clarification. For clarity, this information forms only part of your obligation to become VAT compliant. You should also make contact with your auditors for further advice.
Please also visit the following: www.gov.uk/transition