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SAP Business ByDesign – Impact due to Brexit update 7th June

Please note with the latest announcements

The UK has been granted an extra two weeks to come up with a Brexit solution after talks with EU leaders.

United Kingdom (GB) triggered Article 50 of the Treaty of the European Union on the 29th March 2017.  As set out under that treaty, the United Kingdom had two years to negotiate a Withdrawal Agreement and framework for a future relationship with the EU before the point of the United Kingdom’s exit from the EU at 11pm GMT on 31st Oct  2019.

Steps until now:

  • The UK’s departure date had originally been set for 29 March.
  • If Mrs May can get her withdrawal deal through Parliament next week, that date will be pushed back to 22 May to give time to pass the necessary legislation.
  • If the prime minister can’t get the deal through, the UK will have to propose a way forward by 31st Oct for EU leaders to consider.”

The new dates for automatic tax calculations have been pushed to 31st Oct for “no deal scenario“.

If the Withdrawal Agreement is ratified, the deadline for agreeing the terms of the United Kingdom’s future relationship with the EU will move to 31st December 2020.

A no deal scenario, also called “Hard Brexit”, is one where the United Kingdom leaves the EU and becomes a third country at 11pm GMT on 31st Oct  2019 without a Withdrawal Agreement and framework for a future relationship in place between the United Kingdom and the EU.

This blog highlights impact and steps customer needs to do incase we have a hard exit of United Kingdom (GB) from EU.

Customers will see an activity in fine tuning “Countries” to influence EU Community setting for United Kingdom (GB) with country code GB. When customers want to take the decision for United Kingdom (GB) Hard exit please un select this option of EU community.

Based on this configuration following processes in the system will start evaluating UK as a non EU country

  • Invoice number rule generation
  • Intrastat – Please note United Kingdom (GB) invoices will no longer be sent to Intrastat once this configuration is updated. You can still run your Intrastat runs for the month and from the date this configuration has been deployed invoice data will be restricted

If customer sets fine tuning  ‘United Kingdom (GB) not in EU’ after official leave, e.g. 25th November,invoices and deliveries with ship-to United Kingdom (GB) or ship-from United Kingdom (GB) are sent and considered for Intrastat declaration. The Customer would have to delete those entries (which were created until 25th November) manually from the declaration in November.

    • For United Kingdom (GB) reporting country: invoices and deliveries will not be sent to Intrastat once customers select the option in business configuration
    • For DE, FR, AT, IT reporting countries: invoices and deliveries with ship-to United Kingdom (GB) or ship from United Kingdom (GB) will not be sent to Intrastat once customers select the option in business configuration

 

In case of hard exit, system will automatically start evaluating GB as a non EU country and all tax rules , tax number determination and calculations will take into effect.Please also note EC sales list will stop picking United Kingdom (GB) related invoices from the date of hard exit.

Please note this in for preparation in case there is a hard Brexit. We are monitoring the situation closely and due to changes above mentioned steps can also change.

All updates can be found at

https://launchpad.support.sap.com/#/notes/2756341

4 Comments
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  • As part of Brexit readiness for (tentatively) 31 October 2019, will SAP develop a new Tax Code for “reverse charge” import VAT under the “Postponed Import VAT Accounting” regime, and make VAT return changes to correctly report Import and Export transactions?

    Background: on Brexit date, all EORI registered businesses can use the “Postponed VAT Accounting” regime to alleviate import-related cash-flow disadvantages. For HMRC’s guidance and instructions please refer to: https://www.gov.uk/guidance/accounting-for-import-vat

    Summary of the ByD systems output requirements:

    • A New “Reverse Charge Import VAT” Tax Code,  generating a posting equal to the import VAT amount to both Output VAT and Input VAT G/L account;
    • These VAT amounts should be mapped to boxes 2 (re-purposed) and 4 of VAT return respectively;
    • The net amount of the imports (as per HMRC’s post-Brexit monthly “Import VAT Statement”) should not hit G/L but is required merely for VAT reporting purposes and must be mapped to re-purposed Box 9 (currently used for Intra-EU acquisitions). It appears HMRC also require inclusion of net amount in Box 7, even though this will effectively lead to duplication because net amounts under Tax Code 13 (Imported Goods) are also mapped to Box 7. To date we have not been able to obtain a satisfactory clarification on the topic of duplication.
    • Additional change required in relation to Exports: box 8 (currently used for Intra-EU sales) will be repurposed for exports of goods. This will require changes only affecting VAT return mapping for net amounts posted with existing Tax Code 516 (Export to non-EU country). Net amounts must now be posted to box 8 –  or similar solution not affecting VAT auto-determination. Net amounts must also be posted to box 6 (NB due to the nature of these transactions this will not result in duplicate reporting of net flows).

    The above is a pre-requisite for MTD VAT reporting from ByD by EORI registered businesses who intend to use the postponed VAT accounting regime. Without the additional Tax Code and proposed changes to VAT return mapping, such businesses will have to resort to Excel in order to manually make the required adjustments to the VAT return data, in combination with a bridging software solution in order to make the MTD submission.

    Please advise if this is on the roadmap for delivery by 31 October 2019 23:00 o’clock (or at least by 1st November 2019).

     

    • Hello Maya,

      Sorry for the delay in reply. We were waiting for a decision on Brexit before commenting further. SAP will not be delivering any new taxcodes as for GB you can create your own taxcodes.

      For preparation In you test system by unchecking this flag you can start testing invoice number generation if you have a rule (like in Italy) and Intrastat. You can also start testing how invoices for GB and EU countries look like if you create invoices with invoice date in Nov 2019 if you want to understand the impact.

      Regards,

      Parul

       

  • Hi,

    As far as I can see it’s not possible for the setting to remove GB from the EU to be time-dependent.

    I presume this means when the box is unticked all transactions regardless of date are assessed as if GB was a third-country?  As opposed to transactions date prior to 31st October being assessed as in EU and after 31st October being assessed as inot in EU.

    Lee

    • Hello Mr.Lee,

      By unchecking this flag Intrastat and invoice numbering will start treating GB as a non Non EU country. Tax determination and calculation will start treating GB as a Non EU country from 1st Nov 2019 automatically.

      In you test system by unchecking this flag you can start testing invoice number generation if you have a rule (like in Italy) and Intrastat. You can also start testing how invoices for GB and EU countries look like if you create invoices with invoice date in Nov 2019 if you want to understand the impact.

      Regards,

      Parul