Brexit, VAT & Dynamics NAV / Dynamics 365 Business Central

Importing goods from the EU

From 1st January 2021 import declarations will have to be completed for all shipments from the EU to Great Britain and duties may have to be paid. HM Government have provided a document laying out the steps for how to import goods from the EU into GB. You can view a copy of this document here.

There are other points to consider, such as:

• Do you have an EORI number (Economic Operators Registration & Identification no.)? If not, you should apply for one now via the HM Government site here.
• Do you require an EU EORI number? You’ll need an EORI number from an EU country if your business will be making declarations or getting a customs decision in the EU. Get this from the customs authority in the EU country where you submit your first declaration or request your first decision.
• IncoTerms in your system. Have you agreed Incoterms with your EU suppliers, and do you need to set these up against Vendors in your Dynamics NAV or Business Central system?
• Commodity Codes in your system. Have you set up Commodity Codes against your Items in Dynamics NAV or Business Central? Duties will be based on the Commodity Codes of the goods imported, so it will be important to use the correct codes.
• Review of costs & selling price. Have you reviewed your cost and selling prices to ensure you are accounting for any additional costs incurred by what is now cross-border trading?

VAT Implications

• Do you have any foreign VAT registrations? If yes, in 19 of the 27 EU countries you will need to appoint a VAT Fiscal Representative.
• Will you be using the Postponed VAT Accounting scheme?
  • If you do not, and do not have a Duty Deferment Account, then VAT will have to be paid on imports from EU, and subsequently reclaimed in your periodic VAT return. Read more about completing your VAT return to account for import VAT here.
  • If you do use the Postponed VAT Accounting scheme, then you will include VAT due on imports in the period in Box 1, and include VAT reclaimed on imports in the period in Box 4. Box 7 will continue to include the total value of all goods imported in the period.
  • The government guidance says that an online monthly statement will be available to download and keep for your records. It will show the total import VAT postponed for the previous month which you should include in your VAT Return.
  • The changes to how you report for VAT on these EU transactions will need to be reflected in your VAT Statement in Dynamics NAV or Business Central.
• Reverse charge VAT will no longer apply for imports from the EU, so you will need to amend your VAT Posting setup in your Dynamics NAV or Business Central system.
• Do you currently prepare Intrastat reports for imports? If yes, you will need to prepare those reports, though for 2021 only.

VAT changes required in Dynamics NAV / Business Central

You will need to start thinking about changing your VAT Posting Setup and your VAT Statement. These changes must be in place for Purchase Invoices posted with a date on or after 1st January 2021.

VBPG = VAT Business Posting Group (From Customer or Vendor card)
VPPG = VAT Product Posting Group (From Item card or G/L Account)

These notes should be read in conjunction with the Excel Spreadsheet of VAT Statements - click here to access.

Not using Postponed VAT Accounting

• (1) Changes to VAT Posting Setup
  • VAT Calculation Type becomes Normal where VBPG = EU or whatever equivalent VBPG you are using
  • VAT % becomes 0 where VBPG = EU
• (2) VAT Statement
  • Upload VAT Statement POSTBREXIT after changing the VBPGs and VPPGs to reflect the combinations in your system. (Recommended); or manually change your existing VAT Statement so that:
    • Reverse Charge VAT on EU Purchases is no longer included in Box 2
    • Reverse Charge VAT on EU Purchases is no longer included in Box 4
    • EU Sales is no longer reported in Box 8
    • EU Purchases is no longer reported in Box 9
• (3) Open Purchase Orders and unposted Purchase Invoices:
  • If the VBPG on a PO or PI is EU, then it must be refreshed so that VAT Calculation Type is updated to Normal VAT on each line. One simple way to do this is to change currency code and then change it back. NB: Be careful how you do this - it can delete Dimension values
• (4) VAT will be captured by way of Full VAT Journals when C79 certificates are received
  
  

Using Postponed VAT Accounting

NOTE: The suggestions below are based on the assumption that you should only report the Base value and VAT amounts of non-UK Purchases as provided in the HMRC monthly statements. Other configurations and changes to your setups can also achieve the desired result.

• (1) Changes to VAT Posting Setup
  • VAT Calculation Type becomes Normal where VBPG = EU or whatever equivalent VBPG you are using
  • VAT % becomes 0 where VBPG = EU
  • Create a new Balance Sheet G/L Account for Postponed VAT where Direct Posting is Yes
  • Create new VBPG of e.g. HMRC, and new VPPG of e.g. HMRC. Setup 2 VAT Posting Combinations in the VAT Posting Setup:
    • VBPG = HMRC and VPPG = HMRC, VAT % = 100 and VAT Calculation Type = Full VAT, Purchase VAT Account is the new one created
    • VBPG = HMRC and VPPG = NO VAT (or whatever the Customer's equivalent is), VAT % = 0 and VAT Calculation Type = Normal VAT, Purchase VAT Account is the new one created
• (2) VAT Statement
  • Upload VAT Statement POSTPONED after changing the VBPGs and VPPGs to mirror those in your system (Recommended); or manually change existing VAT Statement so that:
    • Reverse Charge VAT on EU Purchases is no longer included in Box 2
    • Reverse Charge VAT on EU Purchases is no longer included in Box 4
    • Postponed VAT is included in Boxes 1 and 4
    • Base amount relating to Postponed VAT Purchases is included in Box 7
    • EU Sales is no longer reported in Box 8
    • EU Purchases is no longer reported in Box 9
• (3) Open Purchase Orders and unposted Purchase Invoices:
  • If VBPG is EU or equivalent, then it must be refreshed so that VAT Calculation Type is updated to Normal VAT on each line. One simple way to do this is to change currency code and then change it back. NB: Be careful how you do this - it can delete Dimension values
• (4) Set up a new Vendor for HMRC, and a new Payment Method Code of HMRC, with auto-settling to the VAT liability/settlement account
• (5) Monthly Statements from HMRC should be entered as a Purchase Invoice, with all rows using VPPG of NO VAT except for the total VAT which would be entered as 1 row with VPPG of HMRC.
• (6) NOTE that using this setup means that entries with VBPG of EU or ROW would NOT be reported in the VAT Submission - only the Domestic VAT plus HMRC statement of Postponed VAT, though the value of the entries can be viewed from the VAT Statement.

NB: When you run the calc & post VAT statement in test mode you will notice the total will not match box 5 as it normally does, this will be out by the PVA (Postponed VAT Accounting). When carrying out the calc & post this will close all VAT entries and credit the Postponed VAT Account and debit the VAT liability/settlement account.