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Author's profile photo Parul Sharma

SAP Business ByDesign – Impact due to Brexit updated 8th January 2021

As part of Brexit ,we are closely monitoring and working with our Local Product Managers in EU to make sure that its a smooth transition for our customers. For upcoming changes and impact on Business ByDesign please keep a track on this blog.

Please familiarize yourself with “Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community” (the so called “deal”) published here:

https://eur-lex.europa.eu/content/news/Brexit-UK-withdrawal-from-the-eu.html

in particular: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:12019W/TXT(02)

From 1st Jan 2021 following is the impact on customers and following changes are already available your system

Northern Ireland Protocol (ref https://www.gov.uk/government/publications/moving-excise-goods-as-freight-under-the-northern-ireland-protocol-from-1-january-2021)

If you have customer and suppliers in GB and in particular Northern Ireland regions you will have to check and maintain correct postal codes. System will be using postal codes to determine if good shipment is happening to Northern Island Regions for Tax determinations.

System will have a new Tax Number Type

Northern Ireland Protocol: VAT Reg. No
which you as a customer will have to maintain incase you have business transactions in Northern Ireland regions. It will same similar validations as GB VAT Tax Number.

Tax Determination and Calculation

If order/invoice/transaction is from or to a customer/supplier who has address with country GB, system will further check postal codes to determine if it should be treated as EU or Export/Import Transaction.

UK Brexit Postponed Accounting VAT return

We will ship 4 new tax codes for scenarios of exempt , zero and reverse charge functionalities for 5% and 20% VAT rate

and reporting will be based as follows

Box 1 – Include the VAT due in this period on imports accounted for through postponed VAT accounting;

Box 4 – Include the VAT reclaimed in this period on imports accounted for through postponed VAT accounting;

Box 7 – Include the total value of all imports of goods included on your online monthly statement, excluding any VAT

Invoice Numbering

Few countries have invoice number rules for transactions within EU for example Italy. If such a rule is maintained then system will not allow an invoice having both material and service because of Northern Ireland Protocol impact.

Intrastat

A dedicated blog for Intrastat impact can be found at

https://blogs.sap.com/2020/11/25/end-of-transition-period-after-uk-leaving-the-eu-brexit-and-its-impact-to-intrastat-of-sap-business-bydesign/

Upcoming changes

Following changes are under analysis and will be deployed in future.

  1. Impact on EC sales List – We are talking to Tax Authorities to understand the impact on EC sales list and will be deploying changes once its clear.
  2. Sale of Good to Private buyer in GB from EU – If you are selling beyond the threshold of 135 pounds then it needs to be reported in GB and your company needs a GB VAT registration number. Moreover company will have to collect standard sales tax and also file tax return in GB. This is also under analysis and we will inform you on upcoming changes

 

All updates can be found at

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

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      5 Comments
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      Author's profile photo Maya van Gestel
      Maya van Gestel

      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).

       

      Author's profile photo Parul Sharma
      Parul Sharma
      Blog Post Author

      Hello Maya,

      With 2020 transition we have remove the requirement of the customer manually setting the EU flag, system will automatically take care of this.

      Regards,

      Parul

      -------------------------------

      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

       

      Author's profile photo Lee Bown
      Lee Bown

      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

      Author's profile photo Parul Sharma
      Parul Sharma
      Blog Post Author

      Hello Mr.Lee,

      With 2020 transition we have removed the requirement of the customer manually setting the EU flag, system will automatically take care of this.

      Regards,

      Parul

      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

       

      Author's profile photo Peter Coffey
      Peter Coffey

      Hello Parul,

      Concerning the Postponed Accounting VAT Return, what do you see as the correct process to enter such VAT postponed from payment at the border? Would you use the Manual Tax Adjustment screen?

       

      Best regards,

      Peter