When is Brexit day now?

Who knows?

I will try to be brief.

In UK law Brexit day is 29 March 2019. It should be easy enough to change that date, but there would have to be the political will. I am not sure that there is definitely a majority for that. If changing the date can be agreed, then we move on to the next steps. This would need to be voted on next week, and preferably on Monday. If the date cannot be changed, then either the UK leaves on 29 March 2019 or, if sufficient support can be found in Parliament, the Article 50 Notice is revoked.

Next week the UK Parliament may vote for the third time on the deal that is on the table. It has been rejected twice already. The Speaker of the House of Commons has ruled it cannot come back again in this Parliament unless amended. It hasn’t been amended. But there is an offer of a longer period to get ready until 22 May 2019. That may be enough.

If the deal on the table comes before Parliament, and is agreed (I would suggest that is still doubtful as at least eighty MPs would need to change their minds) then there is an extended period until 22 May to prepare for the next stage – the implementation period to 31 December 2020. Strictly that would mean no real change for businesses until 31 December 2020. What then happens after 31 December 2020 relies on whether a trade deal can be agreed between the EU and the UK and, I suggest, whether a solution to the Irish border issue can be found. I don’t know if Brexit could be revoked in that period to 22 May 2019. It definitely cannot be revoked after 22 May 2019.

If, however, the deal is not accepted by the UK Parliament, then the time limit is extended to 12 April 2019 (two whole weeks). I am told that the time limit to revoke the Article 50 Notice is also extended to the same date. The idea is to allow more time for other solutions to be found. Your guess is as good as mine as to whether UK politicians will manage this in an extra two weeks. Their track record suggests not. This means that unless the Article 50 Notice is revoked on or by 12 April 2019, a no deal Brexit on 12/13 April 2019 with no transitional period. I do not believe that the UK would be ready, and would certainly not have passed all necessary legislation, let alone got minor things like new Customs facilities in place. I think it will also leave issues at the Irish Border, even if the UK operates an honesty box as it is suggesting, there is nothing to say that the EU27 will reciprocate.

Could things be held up even further? I sense no appetite for that amongst the EU27, but it is possible. For example, if the EU came up with a deal that looked good, but some flesh needs to be put on the bone to gain agreement not only in the UK, but in the EU27, then I suspect a pragmatic approach would be taken. I’m not sure the resignation of the UK Prime Minister would be enough for a further delay. If a general election was called might be enough, but that would almost certainly mean the UK taking part in the European Elections as well. I think a deal being put the UK electorate (another referendum) might also gain an agreement for a further delay, although it is clear that amongst the two main political parties there is no taste for a further referendum. That would almost certainly also require the UK to vote in European elections.

I am not going to try to draw a flowchart.

In the meantime, as I write, the UK Parliament petition for the UK to Revoke Article 50 and remain in the EU stands at nearly 3,250.000 signatures – and the backing continues to grow. The volume of signatures is larger than the populations of member states Lithuania, Slovenia, Latvia, Estonia, Cyprus, Luxembourg and Malta. Within the UK it is more than the population of Northern Ireland and the population of Wales. This is not directly influential upon the UK Government, and the UK’s Prime Minister has already dismissed it saying she won’t change her mind. Actually, it is not her choice whether I comes before Parliament to be debated. It is the choice of a special parliamentary committee. If that committee decides it should be brought before the House, then it can and will be. The question then is whether it will be allowed time to be debated before 29 March 2019 or 12 April 2019. That would largely be in the hands of the Leader of the House of Commons, and she has already made her opposition to it clear.

So what if the Article 50 Notice is revoked, is that it? Do we just go back to what many in the UK felt (rightly or wrongly) was an unacceptable relationship with the EU. Well possibly. But some changes could be made with the agreement of the EU through implementation of the Tusk plan put to the previous UK Prime Minister, Mr Cameron, as well as adopting changes to the UK’s migration law provided for in EU law. Putting the two together now looks rather inviting compared to what is on the table!

Steve Botham

Did you get a fine for sending your VAT return in late?

There is a form for claiming that you had a reasonable excuse.

As a rule excuses such as “the dog ate my homework” do not tend to work. HMRC do sometimes behave strangely and in one notorious case decided that death was not a reasonable excuse – unsurprisingly the taxpayer won at Tribunal.

With Making Tax Digital it will be interesting to see how things pan out. Allegedly there will be a lightish touch – we’ll wait to see on that. HMRC says that just because you cannot make the software work, they expect you to pay the tax on time. At this stage you might ask how you’re supposed to know the answer if the return does not get filed by the computer and the computer does not tell you the answer. Well you have to guess. It is know as estimation.

I would not expect HMRC to attack small underestimates, but if your normal liability is say £5,000 and you pay, say, £500 and it turns out you should have paid £5,000 expect trouble. If you are on cash accounting, there is a fairly simple way of getting a correct answer. Add up your debtors banking for the quarter and, after filtering out anything that is zero-rated or exempt, divide the total by six (unless you’re into the 5% rate). You can then either add up the bills you have paid where you know that you have been charged VAT, or else look at the previous four returns and work out the input tax as a ratio of output tax from that information (that sounds much harder than it actually is).

Strictly you need HMRC’s permission to “estimate”. Call the National Advice Service and ask for permission explaining your difficulty. They should agree. If they do not, make a note, and in any event ask for the call reference number. If HMRC refuse unreasonably, then you can use this as your reasonable excuse on the form! But do not leave your guess until the last minute!

If you are subject to a fine for late payment, think through what had been happening not only at the time, but also in previous tax periods where you have been late, and submit your “reasonable excuse” on the HMRC form.

If you would like some assistance, it is something we have a lot of experience in.

 

Covertax’s partnership with VAT Forum

Covertax has been a partner in VAT forum for much of the last twenty years. It is through VAT Forum, and also our involvement with the International VAT Association, that we gain not only a knowledge of VAT in other countries, but more importantly an understanding as to how the law works. And we make great contacts with other consultants which we then use for our international client.

The next VAT Forum conference is in the sun. The programme looks pretty interesting, but so does the location!

No Deal Brexit – time limit for EU VAT Refund claims

In the event of No Deal (leaving on 29 March 2019), the time limit for submission of EU VAT refund claims through the portal is 1700 on Friday 29 March 2019. If your claim is late, it may not be met.

After 29 March, claims will revert to the old paper system, known as “13th Directive VAT Refund Claims”. This does rely upon the UK and the EU27 agreeing on reciprocity. I have no indication that this will not be the case. That does mean being able to submit original documents. So those of you who have got into scanning and then shredding your purchase invoices, please retain original invoices for your 13th Directive VAT Refund claims. I am no idea how strict the process will be after Brexit, but it is the norm for “copy” documents to be rejected – that could be a very expensive clear desk policy! It also means sending your claims off to an office for each country. And returns to the days when you need to be sure that your claim reaches the office – lost documents in transit is not excuse. I recall on particularly large claims, I had to take the documents myself and deliver them by hand as we could not get cost effective insured couriers where there was a high value. Instead we relied on our PI policy and an upgraded travel insurance – again costly but amazingly more cost effective than getting an insured courier.

And they said Brexit would get rid of red tape! Clearly not for VAT.

Naturally, we can assist with claims.

No Deal Brexit – Incoterms and Contractual Terms

Urgent. Please check your contractual terms and the incoterms you use. First of all, make sure the incoterms actually reflect your contract. That may seem obvious, but often it is not the case.

Secondly make sure you still want the same Incoterms (or contractual terms) after Brexit. A real example is a company which had DDP (Delivered Duty Paid) terms on an intra EU movement. Apart from the fact that this probably made the supply in the other member state all along (it had been treated as an intra-community movement of goods), it means that following Brexit the UK company will have to have an EU VAT ID (in the particular case, German), pay import VAT and Duty, and then account for the tax in Germany (as a non-established entrepreneur tax on sales may be reverse charged, but this would need to be checked out). This came as a surprise – I bet it did!

We can help with EU VAT registrations and compliance.

Plastic packaging consultation

Following the announcements in Budget 2018, the Treasury has published its plastic packaging consultation. The consultation period closes on 12 May 2019.

It is proposed, subject to consultation, that for produced or imported plastic packaging that doesn’t include at least 30% recycled content, a new tax will be levied on the full weight of the packaging product, at a flat rate set per tonne of packaging material.

This may be straightforward for a single manufacture of a product, and the consultation seeks views on the position where there are multiple manufactures in the production process. For imported goods, the tax would be charged at the point that goods are released into free circulation in the UK. The preferred position is a single threshold at 30% recycled content, though the consultation also looks at an alternative proposal for multiple thresholds with high/medium/low rates.