ITESOFT & VAT IT Talk Brexit And Legislation In Finance.
Part 3 of our latest 5 part series, with our newest partners, VAT IT.
Join Nick Dunnett, Managing Director of ITESOFT UK and Jamie Breslaw, Global Finance Operations Manager of VAT IT as they talk Brexit and legislation changes impacting on the finance function.
Part 3 of a new 5 part ITESOFT Insider View series.
Watch the video, listen to the podcast or read the transcript below.
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ITESOFT & VAT IT Talk Brexit and Legislation Impacting Finance.
Nick Dunnett: Welcome back to the latest ITESOFT Insider View, this episode I have, once again, Jamie from VAT IT.
Delighted to have you back again, thank you for joining us.
You may remember that last week we were looking at how the automotive industry is affected and how we can bring and give real benefit to them there.
This week we are going to be looking at Brexit, changes to legislation and things effecting the finance sector.
Brexit & Legislation.
So, Jamie, where are you at VAT IT when it comes to Brexit?
Jamie Breslaw: I think the first thing, when we hear the buzzword Brexit that we are all fed up with is just the uncertainty.
We still in a transitional period now where ultimately people are looking for answers.
Giving answers is not the right advice at the moment.
We are in a transitional period legislation is being formed and therefor the main things for our clients, and the comfort we give them, is that we are people that are constantly on top of what’s happening and looking at the impact for our clients.
In terms of impact, there are a couple of areas that I would like to get people thinking about and touch on, remembering that nothing is set down in law.
Movement of Goods…
Things to keep an eye on is first, and one of the biggest things, the movement of goods.
Us having this community in the EU and the freedom of goods moving in the EU including the UK.
That is going to change. How it is going to change has not been finalised. But essentially for the UK to bring control back to their borders they are going to have to put controls around goods moving in and out of the UK.
VAT follows the movement of goods and relies on the destination country. This could apply coming in or out of the UK.
But until the UK strikes trade deals to sort what happens with this out, we are in a period of uncertainty.
There could be big implications for companies moving goods, and the impact on the indirect tax consequences of the movement of those goods.
That’s the first thing.
This Isn’t Something New!
Nick: I think that’s a really key point, and I guess the really important thing here for people looking at VAT IT or ITESOFT, actually, whilst we don’t know what’s coming from a specific legislation perspective we are dealing with lots of global clients already.
Whilst the impact of this on a lot of UK companies is going to be big, there are lots of companies that already exist and work in a global way.
Whilst they are not affected by whatever the ultimate decision is going to be between the UK and EUROPE, they are already dealing with these situations with countries outside of the EU.
We are already providing solutions to global organisations and customers where they have got tax being charged on goods coming across borders.
Jamie: That is the knowledge and expertise, it is already there, it is just applying it to new legislation.
Nick: Exactly, the message I am keen to get across to people is that there will be change, it could be big change, but it is not as scary as it could be.
This isn’t something that is so fundamentally new that no one knows what to do about it.
Whatever the ultimate decision is it will follow a pattern that is akin to something that already exists.
Jamie: and we are there to support our clients, in combination together.
Nick. Exactly, so what else to you see as an impact?
Legislation Changes To EORI.
Jamie: OK, so you have this EORI number, so now you have an EU EORI number that is a requirement.
It stands for Economic Operator Registration and Identification Number.
Now, what HMRC in the UK have stated is that you may now need a second one. A UK one.
Companies that have that EU number, just thinking ahead now, make sure you are taking advice and are set up in the right way so that you have the UK one in place if that happens.
That’s another quirk that is happening that may be an impact.
As well as specifically needing a fiscal representative in that country you are doing business in.
Representatives In Country.
Already Belgium and Greece have said that you will need a fiscal representative in our country if you haven’t had one before.
That is something that we can help companies set up with in an international landscape.
That’s something that more and more countries may take up. Belgium and Greece specifically are two countries that have explicitly stated that.
Nick: Ok, good, and what else is there on your side specifically on this topic?
Jamie: It gets more and more exciting, so I hope you are enjoying this.
Digital & Paper Processes.
At the moment, let’s say you have a business in one EU estate incurring expenses in another EU member state.
It was formerly called the 8th directive, its now got a quirkier name, but essentially it is the mechanism in EU law that allows you to legitimately claim from that foreign tax office.
For service based costs, or applying that reverse charge concept which enables one party to account for the output and input which drives efficiencies within that tax landscape whilst in the EU community.
Essentially what might happen is that, where the 8th directive is all online through a portal, whereas the 13th directive, which drives the non-EU to EU flow of transactions is what might happen to the UK.
Now, those claims are still paper based, we are waiting for our global tax offices to all start adopting the ability to do it through an online portal as we are moving through this digitalisation.
We must work with the tax office requirements.
We are in a place already where we service companies in and out of the EU so we know how that works and we can assist clients and help them understand how that may impact their processes in terms of taking things from digital and automated flows back into a compliant claim.
Where you still might need paper documents but the invoices that are compliant can still be held within an AP system.
We can work with our clients to make sure that they aren’t going to be losing free money from the AP with any change in this.
Compliance with Legislation Post Brexit.
Nick: So, what is important there, as well as making sure that you are on top of the legislation. Is also making sure that you have a process that is adaptable and flexible that will allow you to move with what is happening.
That is where automation to your business process can really hep and make a big difference to you.
I think the other thing you touched on there was around digitalisation.
Whether this directive will be paper or digital based. What we are also seeing across the EU is this move towards digitalisation of tax.
Making Tax Digital.
So here in the UK we’ve had the introduction of Making Tax Digital legislation.
Jamie: Spain with the SII requirements and live reporting. Italy as well have adopted.
Nick: Exactly, this whole clearance versus post audit, do you have to report to the government before issuing to a supplier.
Do you reclaim VAT afterwards, and all of that?
Now, I understand you have done some analysis on some of the Making Tax Digital stuff and the impact that has had. Where is that at right now?
Jamie: Phase 1, the initial phase, the government was aware that there was going to be a transitional period.
There was only a 10% take up from companies that were meant to follow this. As high as that… As high as 10%.
There are companies out there, and you are not alone if you haven’t adopted yet.
The main message is that people are scared of change and scared of moving into automation and digitisation.
Drive Change with Legislation.
Perhaps the best way to drive that change s through legislation that makes it mandatory and forces people to adopt and di it. Otherwise you can sit waiting and waiting.
If there are challenges that you have, you will have a provider there, like VAT IT and ITESOFT to help and support through those changes and guide through that process.
At the end you will then see the improvements in efficiencies because of automation.
Nick. Exactly, I think what is critical here is that the solutions they are putting in place are compliant.
Here we are seeing legislation, Brexit is gong to bring changes to legislation, unknown changes.
What is important is that your solution has got the flexibility the adaptability to give you that digitalisation in a standardised way.
Finish Where we Started.
Back to Brexit, we should finish where we started. Are there any other key things that you want to bring to people’s attention?
Jamie: I think we have discussed most of the key aspects.
One thing we didn’t touch on though is the long-distance selling thresholds across the EU for eCommerce sellers.
Now, that could be removed, that automatically triggers an obligation to register in a country where you are conducting and making those sales into.
So that is something else from the eCommerce side when considering Brexit and legislation changes that may come.
If you are a client that is involved in that element of work please get in touch so we can make sure that you are structured compliantly as well!
Nick: Brilliant, well look, we have done a very quick run through today.
There is an enormous amount of uncertainty of legislation and areas this may touch on.
Get In Touch.
If you want to find out some more, please check our websites (link below for VAT IT).
Please look there, you will find a lot more information and detail around the potential implications are and constant updates as more information comes out and the government and trade negotiators help to move this forward.
Jamie: Absolutely, don’t be scared of Brexit it is something that is happening, when you have people here from ITESOFT and VAT IT we are here to hep you navigate that landscape, don’t worry, get in touch, the sooner the better.
Nick: Thank you once again for joining us for this week’s episode of the ITESOFT Insider View.
Join us next week when we will be looking at the Pharmaceutical industry and some of the benefits that industry has gained from using VAT IT and ITESOFT.
Want to know more about VAT IT? Get in touch with Jamie directly on LinkedIn!
Or check out the VAT IT Website.