Thursday, July 11, 2019

Freight Forwarding and Logistics Representatives Criticise No Deal Brexit VAT Scheme

Too Few Sign Up After Government Ignored Advice
Shipping News Feature
UK – In August 2018 the British government issued a notice, and subsequently launched a scheme intended to protect VAT revenues on the two million or so foreign parcels which are imported into the country every day should it exit the EU with no deal. In order for the scheme to be successful it had expected overseas businesses to sign up in their tens of thousands. Less than four hundred have in fact registered. An HMRC statement said:

“Whilst we expect registrations would increase if a no-deal exit were confirmed, registration numbers for the Import VAT on Parcels online service are not a reliable indicator of overall readiness because there are other ways to pay import VAT via third parties.”

Parcels entering the country from outside the EU are currently liable to VAT, with the scheme in place giving relief to goods valued at less than £15 being abolished under the new rules. The government, naively according to some, expected overseas exporters to register online, these would include EU companies which currently enjoy VAT free status. In this way overseas sellers of goods to the UK would account for the UK VAT owed and they would pay the money directly to the exchequer.

This means the new rules would mean that HMRC would depend entirely on the honesty of the overseas suppliers to ensure the revenue stream, something the experts in logistics have advised against. Leading body for the freight forwarding and logistics sector, the British International Freight Association (BIFA), has seriously questioned the practicality of the scheme.

As an apolitical body, BIFA’s says its policy for many years has been to work positively with government departures and provide constructive criticism and practical suggestions as to how to improve policies, where it is deemed appropriate. Now however BIFA says that Brexit has highlighted differences between government policy and the sector of the economy that is responsible for managing the supply chains that underpin the UK’s visible international trade.

This has seriously strained the relationship between the officials and the industry representatives when advice has been dismissed and, on occasion, resulted in Government consultation that has been rushed and led to some public policy announcements being made before they have been fully thought through. Robert Keen, Director General, observed:

“To date, BIFA has refrained from publicly criticising Government departments. However, recent policy announcements have caused us significant concerns relative to the UK’s Brexit preparations and we feel it appropriate to highlight areas where planning needs considerable improvement.

“We are not surprised that few companies have signed up for the scheme. In principle, the UK’s VAT policy on small parcels, relative mainly to e-commerce trade, expatriates the liability for UK import VAT to businesses that are not established in the UK, thereby significantly reducing HMRC’s ability to enforce VAT compliance and revenue collection; potentially forcing freight forwarders and customs agents to become indirect representatives liable for import VAT and other import charges.

“BIFA and its Customs Policy Group advised HMRC that this would not work in practice, but that advice appears to have been ignored. This is not the first time and several recent policy announcements have caused us significant concerns relative to the UK’s Brexit preparations.

“Earlier this year we expressed our concerns privately about the contradictory information on the use of EORI numbers when completing customs entries post-Brexit. The initial guidance was that they could be used, late in the day the decision was reversed, and trade was advised that this was not possible and that EU traders would have to register and obtain a UK EORI number.

“We have also aired our concerns publicly about Transitional Simplified Procedures (TSP), the Government’s flagship policy aimed at alleviating the congestion at the frontier and facilitating the work of customs agents. We are still lacking detail of the data required to complete the supplementary declaration despite the fact that the original Brexit date has long since passed.

“We are still uncertain whether the proposed TSP procedures will work, post October 31st, when systems are largely untried, communication links between the parties involved on the processes are not established, many remain unaware of their responsibilities, and the freight forwarding companies that are at the heart of international trade movements appear to be excluded from them.”

“We echo the recent words of the Public Accounts Committee chair Meg Hillier and agree that with less than four months to go before the UK is expected to leave the EU, momentum appears to have slowed in Whitehall. Departments must listen to trade associations such as BIFA, urgently step up their preparations and ensure that the country is ready.”