Preparing for a No-deal Brexit with Dynamics - Azzure IT
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Preparing for a No-deal Brexit with Dynamics

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On the 23rd June 2016 the UK held a referendum on whether to remain a member of the European Union or leave the European Union. Since the decision to leave, most businesses have been trying to second-guess what will happen to the UK and the implications this will have on trade. Many have held back in making business investments and some are stockpiling, with concerns over supply-chain and border issues. Furthermore there are the concerns about future trade compliance, periods of regulatory and legal uncertainties and currency fluctuation.

Whilst Azzure cannot provide all the answers, we can help you prepare in the case of a no-deal Brexit and the impacts it will have on the way you use Microsoft Dynamics NAV or Business Central. Below are the 3 key areas we believe you should be considering:

Accounting for VAT

In a no-deal Brexit scenario there will be no change to VAT rules for most UK businesses, with the VAT system to continue after the UK leaves the EU. Existing VAT rules relating to UK domestic transactions will continue to be in-line with current rules.

  • There will be implications and rule changes that will apply to transactions between UK and EU member states.

UK businesses importing goods from the EU
In a no deal scenario the current rules for imports from non-EU countries will also apply to imports from the EU with some specific rules outlined below.

Accounting for import VAT on goods imported into the UK
If no deal is reached with the EU, businesses registered for VAT in the UK will be able to account for import VAT on their VAT return rather than pay when, or soon after, the goods arrive at the UK border.

This will apply to both goods from EU and non-EU countries. This should reduce the impact on cash flow for businesses after the UK leaves the EU. There are some exceptions e.g. parcels received containing goods of a value equal to or less than £135, which will need to be paid on arrival.

For businesses not registered for VAT in the UK, the above will not apply and import VAT will need to be paid up front at the time of import.

For more guidance, see GOV.UK – Accounting for import VAT if the UK leaves the EU without a deal

UK businesses exporting goods to the EU

There are two sets of exporting rules:

  • UK businesses exporting goods to EU consumers
  • UK businesses exporting goods to EU businesses

For businesses exporting goods to EU consumers, distance selling arrangements will cease with UK businesses able to zero rate sales of goods to consumers.

For businesses exporting goods to EU businesses, VAT registered UK businesses will continue to be able to zero-rate sales of goods to EU businesses but will not be required to complete EC sales lists. Existing EU rules would mean that EU member states will treat goods entering the EU from the UK in the same way as goods entering from other non-EU countries with associated import VAT and customs duties due when the goods arrive into the EU.

What does this mean for how I use Microsoft Dynamics NAV or Business Central?

A review and an update to VAT Posting Setup is required to confirm VAT Calculation Type has been appropriately set to Reverse Charge for EU based posting groups, and to update posting groups outside of EU with Reverse Charge NB existing VAT posting setup differs business to business.

The VAT Statement will require an update to show the new Reverse Charge entries.

EC Sales List

In the instance of a no-deal Brexit, UK businesses will not be required to complete EC Sales Lists, refer to the above ‘UK businesses exporting goods to the EU’.

UK businesses will still be required to report EC Sales Lists as normal for the period up to the period the UK leaves the EU.

For more guidance, see GOV.UK – EC Sales List reporting without a deal

What does this mean for how I use Microsoft Dynamics NAV or Business Central?

The EC Sales List reporting functionality will become redundant.

Trade

The importing and exporting of goods will be affected by a no-deal Brexit. For the VAT implications see above section ‘Accounting for import VAT on goods imported into the UK and UK businesses exporting goods to the EU’.

To prepare your business for importing and exporting goods you should follow the checklist provided by GOV.UK which includes important steps such as obtaining an EORI number, classifying your goods for Intrastat reporting etc.

For more guidance, see GOV.UK – Importing and exporting without a deal

Importing and Exporting Goods
VAT registered businesses complete Intrastat reporting if they meet threshold requirements. This will continue in a no-deal scenario. Intrastat shows the receipts and shipments of goods across borders.

What does this mean for how I use Microsoft Dynamics NAV or Business Central?

If you are already set up for Intrastat reporting, no changes are required. If you have recently met the threshold requirements additional setup will be required against customers, vendors and items e.g.: Tariff numbers, Commodity codes, Weights

Further Guidance

The information contained in the body of this document is to assist businesses prepare Microsoft Dynamics NAV or Business Central for a no-deal Brexit scenario. For further details on the implications of a no-deal Brexit, please refer to www.gov.uk/government/brexit

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