In the months of uncertainty arising from the “will we, won’t we” crash out of the EU, some changes to VAT and trading in the EU have been agreed and implemented by the EU Commission.  These changes took effect on 1 January 2020.

These changes are designed to standardise the rules on intra-EU trade and give them a proper statutory framework.  The UK left the EU on 31 January 2020 but during the transition period that runs until 31 December 2020 it is expected that, for VAT purposes, the UK remains in the EU VAT area.  Therefore, these changes will apply to UK businesses for the whole of 2020.

In practical terms there is little change but the changes impose formal record-keeping and administrative procedures that businesses that trade with the EU need to be aware of.

The four “quick fixes”

1. Call-off stock

Before 1 January 2020 if a UK business moved its own stock from the UK to a customer’s premises (or a storage facility under the customer’s control) in another EU country the business may have had to register for VAT in that country. However, many EU states operated a simplification that meant that a business trading in this way did not have to register in that country.  When the stock was sold to the customer (when it was “called off”) the sale was treated as a normal intra-EU sale and the customer accounted for the VAT.  The countries allowing this simplification applied different conditions, making trade with more than one EU country complicated.

From 1 January, the simplification is applied to all EU countries according to a uniform set of rules.  Note that the stock must be intended to be sold to the customer under whose control the stock is kept.

2. Chain supplies

This is where there are successive supplies of the same goods where the parties are in different EU countries but the goods only move once; from the original supplier to the final customer.  Only one of the supplies can be an intra-EU supply (and therefore zero-rated) but which one was not always clear as different EU countries have had different views.

From 1 January, if the original supplier is responsible for the transport of the goods, then the first supply is the intra-EU supply unless the next person in the chain can provide a valid VAT number from the country where the goods are despatched from.  The supplier then treats the sale as a normal domestic sale.

However, this does not help where the original supplier is not responsible for the transport. Therefore, it is very important to identify which party is responsible for transporting the goods.

3. VAT status of customers

The requirement to obtain and verify the VAT status of business customers in other VAT countries has now been incorporated in EU legislation (previously it was only in domestic legislation).  The customer’s VAT number must also appear on the EC Sales List.

4. Evidence of transport of goods

The requirement to hold evidence of the movement of the goods was also only in domestic legislation. EU regulations have now been amended to require that the supplier or the customer should confirm to the other party that the goods have been moved.  The supplier will also have to obtain two pieces of independent evidence showing where the goods have been moved from and where they have been moved to.  The regulations contain lists of the acceptable documents.  This means it is more important than ever to obtain evidence of transport in an area where documents can be notoriously difficult to extract from other parties.