EU-UK Brexit Trade and Cooperation Agreement - VAT fraud & mutual assistance

The Brexit EU-UK Trade and Cooperation Agreement includes a Protocol on cooperation and combating VAT, customs and excise fraud, plus mutual assistance between the EU and UK on recovering tax claims. This creates a framework between the UK and EU27 member states to assist each other in compliance with VAT legislation and protecting VAT revenues and recovering tax and duties on each other’s behalf. This will mean most of the EU27 states that require businesses from third countries (now including UK) to appoint a Fiscal Representative for VAT registrations will not impose the obligation.

The Protocol includes requesting states (EU or UK) being able to ask requested states to use their debt recovery processes to be used to collect outstanding in-scope taxes and penalties under the laws of the requesting state. The requested state must treat the request as any other claim of that state. There is assistance request threshold of £5,000 per claim.

The VAT and customs protocol includes details covering:

• Exchange of information for tax assessments and to combat VAT fraud; and
• Recovery of VAT, customs and excise duties levied by the UK or EU27, including penalties, interests and costs.

The protocol is part of the planning as the UK leaves the EU VAT regime 1 January 2021.

Administration of VAT mutual assistance

The UK and EU27 will create liaison offices and competent official for the purposes of cooperation and data exchange, with the necessary powers to cooperate in mutual assistance exchanges, investigations and debt recovered. A Specialised Committee will be established to meet at least twice a year to review the arrangements - Trade Specialised Committee on Administrative Cooperation in VAT and Recovery of Taxes and Duties. There is a total of 19 such committees being established as part of the Agreement.

A service level agreement will be established between the UK and EU27 to govern the quality and quantity of services. Generally, requests for information must be replied to in less than 90 days.

In addition to VAT and customs, information exchanged may be applied to claims relating to compulsory social security contributions. It may be used further under reasonable request. Data supplied may be passed onto further states under the agreement without further consent.

Exchange of tax information

Competent tax authorities may provide spontaneous exchanges of information without prior request. This would apply where a state believes a breach of VAT legislation in another state has taken place. The type of information to be provided via automatic exchanges of information will be determined by the above Committee. But states may abstain from this if it imposed new obligations on taxpayers or impose a disproportionate burden on that state.

Other Procedures

Tax authorities from the requesting authority may send officials to other states to participate and oversee any investigations with the consent of the requested authority. Requesting and requested states may agree to exercise simultaneous VAT control and data requirements of specific taxpayers.

Any request for recovery shall be accompanied by a uniform instrument permitting enforcement in the State of the requested authority. 

Data will be exchanged electronically via the EU's common communications network / common systems interface (CCN/CSI -CCN2).

Controls on requests for tax recovery claims

There will however be limited on the amounts and frequency of requests, including checks that the requesting authority has exhausted other sources. Or that the request would give rise to disproportionate difficulties for the requested state. For example, a requesting authority may not oblige a requested authority to recover debts when the taxpayer has assets in the requesting state. The requested state will not be obliged to adopt requests for information or precautionary measures in the case it goes beyond normal procedures or cause serious economic or social difficulties.

Disputed claims and enforcement procedures concerning requests and issues shall fall under the laws and procedures of the applicant country. The applicant state may request precautionary measures by the requested state to protect against further losses.

VAT Specialised Committee

A joint Specialised Committee will be appointed to meet regularly and review the effectiveness of the Protocol at least very five years. It will review the form and scope of information requests, including the automatic exchange of information. Consider out the liaison offices work together, and the completion of a Service Level Agreement.