Post-Brexit Transition Period: Account Tax Setup Changes
Account Tax Setup Changes for U.K. Nexuses
Here are the recommended changes you must make in your NetSuite account to ensure tax reporting compliance:
Set the Valid Until Date for EC Tax Codes
To set the Valid Until Date for EC tax codes:
- 1. Navigate to Setup> Accounting > Taxes > Tax Codes
- 2. Under any EC tax code (e.g. EC Goods Standard Rate tax code – ES-GB), click Edit.
- 3. Enter December 31, 2020 in the Valid Until field.
Important: The Valid Until field date for EC tax codes should reflect the correct and agreed Brexit date. This is a sample date and should be changed in case Brexit date is finalized to a later date.
Inactivate the EC Tax Codes
You should inactivate EC tax codes since these are no longer required. However, you can inactivate them on a later date in case the EC tax codes are still required for the following certain use cases, such as:
- 1. You need to issue credit notes for invoices raised before January 1, 2021.
- 2. You have stock adjustments or sales orders that have been fulfilled, but not yet invoiced.
To inactivate tax codes:
- 1. Navigate to Setup> Accounting > Taxes > Tax Codes
- 2. Sort the tax codes by country, select United Kingdom on the Country field list
- 3. Check the Show Inactives box
- 4. In the Inactive column, check the boxes of the United Kingdom EC tax codes that you want to inactivate
- 5. Click Submit
Update the Tax Schedules
If the Advanced Taxes feature is enabled in your account, ensure that EC tax codes are not used in your tax schedules.
To update tax schedules:
- 1. Navigate to Setup> Accounting > Taxes > Tax Schedules
- 2. Select the tax schedule (i.e., Standard)
- 3. The selected tax code in Sales Tax Codeand Purchase Tax Code field lists should not be an EC tax code.
- 4. If you are using OneWorld, on the Non-US Nexuses subtab, ensure that selected tax code in the Sales Tax Code and Purchase Tax Code field lists of United Kingdom nexus is not an EC tax code.
Update the Customer Records
If a default tax code is associated with the customer record, you must ensure that selected default tax code is not an EC tax code.
To update the tax code on the customer record:
- 1. Navigate to Lists> Relationships > Customers
- 2. Click the Edit link of the customer record
- 3. On the Financial subtab, ensure that selected tax code in the Tax Item field list is not an EC tax code.
Update the Vendor Records
If a default tax code is associated with the vendor record, you must ensure that selected default tax code is not an EC tax code.
To update the default tax code on the vendor record:
- 1. Navigate to Lists > Relationships > Vendors
- 2. On the vendor record, click Edit
- 3. On the Financial subtab, ensure that selected tax code in the Tax Code field list is not an EC tax code. If you are using OneWorld, click the Subsidiarys ubtab, ensure that selected tax code in the Tax Code field list for United Kingdom subsidiary/nexus is not an EC tax code.
- 4. Click Save.
How to Record Postponed Import VAT transactions in NetSuite ?
To create Import VAT code for postponed accounting scheme:
1. Navigate to Setup> Accounting > Taxes > Tax Codes > New
- For OneWorld accounts:
o Go to Setup > Accounting > Taxes > Tax Codes > New
o Select United Kingdom in the country list on the New Tax Code page.
2. On the Tax Code page, enter values in the following fields and check the applicable tax code properties:
- Tax code: IMPA-GB
- Rate: 0%
- Effective From: Enter January 1, 2021
- For OneWorld accounts:
o Subsidiaries: Select the subsidiary that has United Kingdom as nexus
o Include Children: Check this box if you want to include child subsidiaries.
- Reverse Charge Code: Tick this check box
- Notional Rate Derived From: Select S-GB (20%) – or equivalent if you have re-named tax codes in your account.
- Tax Agency: Select the U.K. tax authority you submit tax reports and remit payments to
- Tax Type: Select VAT
- Available On: Purchase Transactions
- Import: Tick this check box
- Notional Tax Debit Account: Enter VAT on Purchases
- Post to Notional Tax Amount: Tick this check box
- Notional Tax Credit Account: Enter VAT on Sales
- 3. Click Save.
Important: The newly-created postponed import VAT code (IMPA-GB) has the same properties of the existing I-GB tax code which is currently reported in Box 7. You can use Saved Search to filter the purchase transactions with IMPA tax code. If you are using the Import CSV feature to create or update multiple purchase transactions where Postponed Accounting applies, ensure to use the postponed import VAT code (IMPA-GB).
Export of Goods from U.K. to EU countries
Currently, the O-GB tax code is used for zero-rated international exports which is reported in Box 6 of the UK VAT100 return. After Brexit, the same tax code should be used for UK export transactions to EU countries. The net amount of sales to EU countries will need to be reported in Box 8.
UK VAT100 Return after Brexit
The International Tax Reports SuiteApp is planned to be updated by mid-January 2021 to reflect the UK VAT100 form changes. A new tax property for the postponed import VAT code will be introduced to correctly report the values in the VAT100 return. Import transactions under the postponed accounting scheme will be reported in Boxes 2, 4 and 9. Zero-rated export transactions will be reported in Box 8.
The following table summarizes the form changes of UK VAT100 return :
| Box Number | Box Label (Before Brexit) | Box Label (After Brexit) | Reported Value |
| 2 | VAT due in this period on acquisitions from other EC Member States | VAT due in this period on imports accounted for through postponed accounting | Notional tax amount of imports (postponed accounting) |
| 4 | VAT reclaimed in this period on purchases and other inputs (including acquisitions from the EC) | VAT reclaimed in this period on purchases and other inputs including imports | Sales tax amount, notional tax amount of purchases, net or tax amount of 100% VAT bill |
| 8 | Total value of all suppliesof goods and related services, excluding any VAT, to other EC Member States | Total value of all exports of goods, excluding any VAT | Sales net amount for all exports |
| 9 | Total value of all acquisitions of goods and related services, excluding any VAT, from other EC Member States | Total value of all imports of goods, excluding any VAT | Purchase net amount for all imports |
Account Tax Setup Changes for EU Subsidiaries/ Nexuses
Similarly, goods from and to the U.K. will no longer be treated as intra-community transactions for EU member subsidiaries/nexuses. These will be considered as either import or export transactions to the U.K. Users should not apply any EC tax code to their sales or purchase transactions to or from U.K.
A standard zero-rated export tax code should be applied to sales transactions to the U.K. An import tax code should be applied to purchases transactions from the U.K. We do, however, advise that you check each country’s tax determination and reporting rules as ultimately that responsibility lies with your business.
Important: You should check your VAT return and ensure that goods to and from U.K. are not reported as intra-community transactions but as import and export transactions.
Changes in the System
The system marks the 28 countries that are members of the EU and/or follow the EU rules (Iceland, Liechtenstein, and Norway).
Based on this mark, the tax lookup determines the nature of the cross-border transaction and assigns the tax codes based on the setup. These marks are going to be removed from U.K. depending on the factual situation and exact date of termination of membership and/or following the EU tax rules. This will be pushed into production at the date of termination of membership of EU.
After the change, the tax lookup will consider the U.K. as a non-member of the EU and will not follow EU tax rules and determine the tax codes accordingly.
These changes will be automatically implemented and pushed to all accounts in EU member countries. The date for this is still to be determined.
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