VAT: Consignment and Call Off Stocks Post Brexit

At the moment, whilst the UK is a member of the Single Market and sits within the Customs Union, the UK benefits for call of stock and consignment stock simplifications for intra EU transactions.  That’s both for goods coming into the UK from the EU27 and to the EU27 from the UK.

In brief, in the UK call off stocks (roughly, stock under the control of a single customer) do not require a local VAT registration, whereas Consignment stocks (roughly, your stock held to distribute to several customers) does.  The registration involves a little red tape, but once set up it is fairly straightforward.  There are similar, but not identical rules, in the EU27.

At the moment, consignment stocks and call off stocks moving into the EU (including the UK) from third countries (for example the United States) are treated as imports with VAT and duty incurred at importation.  Stocks then distributed from a stock within the EU (effectively consignment stocks, but dependent upon your contractual arrangements, this can include call off stocks) require a local VAT ID – so once again some red tape which is fairly routine to manage once set up, but you have the extra cost and hassle of importing the goods.

Unless a deal can be done to replicate the current arrangements (and the prospect changes daily) movements between the UK and the EU27 will follow the third country rules.  Imports with VAT and duty, plus a local VAT registration in many if not all cases.

Some businesses are already moving stocks around the EU, both to and from the UK, in order to manage the position post 29 March 2019 – once again planning on a “no deal” or “no single market and Customs Union” solution, or just outright confusion (for example, the Customs authorities may struggle to cope or the IT solutions proposed may have issues).  This is currently being driven by the logistics risks, but some are also changing the way they do business.  Certainly, if you have call off stocks, or are moving goods for processing between the UK and the EU27, you would wish to minimise the logistics delays at import or export.  Therefore, consideration needs to be given now as to whether local VAT registrations are required.

Indeed, some businesses which do not current use consignment or call off stock arrangements may need to start to do so because of Brexit, if only to protect their supply chain.  In my opinion, the cost of an unneeded VAT registration is far outweighed by the cost of getting goods trapped at the port or being unable to set up a VAT registration timeously post Brexit.

There are some technical issues with applying early for a UK VAT ID, for example.  This is because if you are moving call off stocks from the EU27 to the UK, you currently enjoy a simplification and it is possible that HMRC will refuse a registration until matters are clear.  That is going to create problems for all businesses concerned because, if they do, HMRC is highly unlikely to have the resources to meet their current level of efficiency – six weeks.  In brief, you could be waiting months for a VAT ID.  It may be better to consider provoking a registration, perhaps by forming a consignment stock in the UK.  And if the registration isn’t needed – cancel it.

Steve Botham