What reporting will be needed after 31 December 2020?
Exports and imports
Although the UK left the EU on 31 January 2020, existing VAT rules continue to apply until the end of 2020. From 1 January 2021, the UK will then adopt different VAT procedures, which will make a big difference to your business if you buy or sell goods within the EU.
Tip. From 1 January, the phrases “acquisitions” and “disposals”, used for goods bought and sold in the EU, will disappear. All goods coming into or leaving the UK from abroad will then be classed as “imports” and “exports”.
Trap. The exception is Northern Ireland (NI). The Northern Ireland Protocol means that acquisitions and disposals will continue because of the need to have a soft border with Ireland as part of the Good Friday agreement.
VAT returns
Excluding NI-based businesses, three boxes on your VAT returns will always be zero for periods that begin on 1 January 2021 or later. These are Boxes 2, 8 and 9, which relate to EU trading in goods. From 1 January, postponed accounting will be available for VAT-registered businesses that import goods. This means that VAT is deferred when the goods enter the UK and you will declare the VAT on your return by making a reverse charge calculation.
Example. Jill is a retailer who imports clothes from France in March 2021 with a value of £20,000. She is VAT registered in the UK and has applied to adopt postponed accounting for VAT purposes. No VAT will be payable when the goods arrive from France and Jill will account for output tax of £4,000 in Box 1 of her next VAT return, i.e. £20,000 x 20% VAT. As the goods relate to a taxable business, she will claim the same amount as input tax in Box 4. The net value of the expense is recorded in Box 7 as an input, i.e. £20,000.
Tip. If any of the goods had qualified as children’s clothing, i.e. zero-rated, the 20% VAT calculation would be replaced by 0% for these items.
Trap. When making your reverse charge calculation, you must treat the input tax entry exactly the same as VAT paid on a domestic purchase invoice. In other words, your claim is reduced for any exempt, non-business or private use of the goods.
EC Sales Lists
Apart from NI-based businesses, EC Sales Lists will be abolished. This is because all sales of goods outside the UK will be classed as exports rather than disposals. In other words, it will make no difference whether you are exporting goods to an EU or non-EU country.
Instrastat
Somewhat surprisingly, you must still complete Intrastat arrivals forms in 2021 if they are relevant to your business. But Intrastat sales declarations will be abolished. The annual threshold for Intrastat arrivals is £1.5m, which will remain unchanged. The arrivals report is still needed because customs declarations for imported goods can be deferred up to six months until July 2021. The government therefore needs the information recorded on the Intrastat arrivals form to produce prompt and accurate trade statistics.