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Enlargement of the European Union (EU)
Background
The following ten countries are due to join the EU on 1 May 2004:
Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta,
Poland, Slovakia and Slovenia. That will bring the total Member
states to 25.
UK businesses will therefore have to revise VAT accounting
and customs duty procedures in respect of transactions with those
new Member states from 1 May 2004. The following notes assume that
readers are familiar with the processes required for movement of
goods between the existing 15 Member states.
Cross-border movements of goods
From 1 May 2004, goods arriving from the 10 new Member states will
cease to be "imports" and will become "acquisitions";
goods sent to the 10 new Member states will cease to be "exports"
and will become "dispatches". Accordingly, it will no
longer be necessary to complete full customs entries in respect
of such trade.
Acquisitions
From 1 May 2004, customs duty and import VAT will no longer be payable
on goods originating in the new Member states. Instead, acquisition
VAT will have to be accounted for in the same way as for the existing
15 Member states. However, a supplier in a new Member state will
have to show a UK customer's UK VAT number on his invoice (otherwise
VAT at the rate applicable in the supplier's member state will have
to be charged).
Dispatches
Dispatches of goods to the new Member states will still be zero-rated
for VAT purposes, but will be subject to the requirement that the
customer's VAT number must be quoted on the supplier's invoice.
Work on goods
The supply of work on goods takes place where the goods are at the
time the work is done. When goods are worked on in the UK, they
must subsequently be removed from the UK after the work is done
to avoid a charge to UK VAT. where the goods are removed and the
customer belongs outside the EU, the supply is zero-rated. Where
the customer belongs in another EU Member state, the place of supply
is removed to the customer's place of belonging and the customer
accounts for any VAT due. In each case, UK suppliers must be able
to satisfy HM Customs & Excise (Customs) that the goods have
been removed from the UK. For EU customers, Customs must also be
satisfied that the customer is in business - the simplest way to
do that is again to quote the customer's VAT number on the sales
invoice.
It is not yet clear whether the 10 new Member states
will operate the easement where goods are sent there for work to
be carried out on them.
Statistical and other information
The normal returns and records for intra-EU trade will have to be
completed:
Intrastat
Details of trade with the 10 new Member states will have to be included
in monthly Intrastat returns. Separate Intrastat returns are required
for each of arrivals and dispatches where trade with other EU businesses
exceeds certain annual values. The values for 2004 have been
reduced from £233,000 to £221,000 for both arrivals
and dispatches.
EC Sales Lists
Calendar quarterly returns showing the value of goods sold to each
EU customer have to be completed.
Register of work on goods
Where goods move from another EU member state into the UK to be
worked on without change of ownership, the UK supplier must maintain
a register of work on goods.
Action points
The following actions are suggested (the links below work on "control,
click" basis):
· Provide details of UK VAT registration numbers
to suppliers in the new Member states;
· Obtain VAT numbers from customers
in the new Member states. Details of the VAT number format for the
new Member states can be found at www.hmce.gov.uk/business/importing/euenlargement/eu-enlargement-vat-reg.htm;
· Review levels of imports from new
Member states with a view to reducing the level of guarantee provided
for import duty/VAT purposes. (Such action should have been taken
in December 2003 in any case following the introduction of SIVA
- simplified import VAT accounting - see www.hmce.gov.uk/about/reports/siva-affect-you.htm);
· Revise records for acquisition VAT accounting
to ensure that the correct amount of VAT is brought to account on
goods acquired from suppliers in the 10 new Member states;
· Revise records for Intrastat arrivals accounting to ensure
that goods arriving from the 10 new Member states are included.
If Intrastat arrivals returns are not currently submitted, check
that the value of arrivals from the new Member states does not mean
that the £221,000 threshold will be breached so that returns
will be required for the first time.
· Revise records for Intrastat dispatches
accounting to ensure that goods shipped to the 10 new Member states
are included. If Intrastat dispatches returns are not currently
submitted, check that dispatches to the new Member states do not
mean that the £221,000 threshold will be breached so that
returns will be required for the first time.
· For further information on the 10
new Member states, check www.uktradeinfo.com/index.cfm?task=euexpansion.
