November 2020 / United Kingdom

On 19 November 2020, HM Revenue & Customs (HMRC) published a policy paper announcing changes to existing value added tax (VAT) legislation required in light of the United Kingdom (UK) leaving the European Union (EU) (Brexit). The changes will be effective as from 23:00 GMT on 31 December 2020 and include the following:

• the VAT zero-rate that currently applies at airports for the handling of qualifying aircraft and the storage of goods, currently relies in part on the direct effect of EU legislation. An amendment to the VAT Act 1994 Schedule 8 Group 8 will ensure that the zero-rating will continue to apply;
• the zero-rate will, also, be extended to cover the handling of international trains and the storage of goods carried in them;
• changes will be made to remove the exemption from VAT of pension fund management services supplied to pension funds established in the EU. The VAT treatment will be the same as for services provided to pension funds in the rest of the world; and
• a provision of the Taxation (Cross-Border Trade) Act 2018 (paragraph 94(4)(c)) is to be removed as it has been superseded by changes in the Value Added Tax (Tour Operators) (Amendment) (EU Exit) Regulations 2019 concerning the VAT treatment of designated travel services.

On 19 November 2020, HM Revenue & Customs (HMRC) updated its guidance introducing changes to legal rulings for the classification of goods from 1 January 2021. The guidance provides instructions with respect to the action businesses need to take in the following situations:

• if they have a Binding Tariff Information decision;
• if they are applying for a ruling before 1 January 2021; and
• if they are applying for a ruling after 31 December 2020.

For the period up to 31 December 2020

Existing Binding Tariff Information decisions will be converted to an Advanced Tariff Ruling at 23:00 GMT on 31 December 2020 unless the business requests otherwise. An Advanced Tariff Ruling will not be recognised by the European Union (EU).

Applications for Binding Tariff Information decisions before 1 January 2021 will need to be done using the current system. For imports into and exports from Great Britain Binding Tariff Information decisions given before 1 January 2021 will be converted to an Advanced Tariff Ruling. Those given after 31 December 2020 will be Advanced Tariff Rulings.

For importing into or exporting from Northern Ireland or the EU it will be necessary to hold an exchange of reporting information (EORI) starting XI and advise HMRC that the Binding Tariff Information decision is for imports into and exports from Northern Ireland or the EU.

For the period after 31 December 2020

Businesses can, only, apply for an Advanced Tariff Ruling if they have an EORI starting GB and intend to import into or export from Great Britain.

Businesses importing into or exporting from Northern Ireland or the EU will need to apply for a Binding Tariff Information decision, have an EORI that starts XI and be established in Northern Ireland.

Finally, HMRC indicates that it will update the guidance again in the future.

The HMRC guidance can be accessed here.

On 30 October 2020, the European Commission (EC) announced that the infringement procedure against United Kingdom regarding income tax relief for losses on disposals of shares had been closed.

According to the EC's reasoned opinion, the share loss relief should also be applicable to investments in non-UK resident entities to ensure that this relief is compatible with the free movement of capital (article 63 of the Treaty on the Functioning of the EU (TFEU)).

The United Kingdom followed EC's request in section 38 of the Finance Act 2020 by extending the income tax and corporation tax relief to disposals of shares in companies anywhere in the world (applicable as from 24 January 2019, see here). For the Finance Bill 2020 Explanatory Notes, see "Clause 37: Losses on disposal of shares: abolition of requirements to be UK business" here.