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Tackling Supply Chain Complexities Post-Brexit: What SMEs Need to Know

February 26, 2026

AGN EMEA Tax Committee News

Brexit has transformed cross-border trade, bringing new VAT, customs, and supply chain complexities. For UK businesses, understanding these changes is essential to manage risk and reduce costs. Explore key insights, real-world lessons, and practical strategies to keep your EU trade efficient and compliant.

Introduction

Without getting involved in a debate about Brexit, I think it is uncontroversial to say that it has created significant complexities, and costs, for UK businesses trading with European suppliers and customers.

Even today, five years after Britain formally left the EU, there still appears to be a lack of understanding about the impact of Brexit on supply chains including customs duty and VAT.

Place of Supply

There remains confusion about the basic VAT place of supply rules, especially where UK businesses are buying goods from EU suppliers and selling to customers in other EU Member States. We frequently encounter clients that still consider that they can rely on the triangulation simplification without having a VAT registration in the EU.

Incoterms

There also appears to be a lack of understanding about Inco terms and how they impact the time and place of supply. For example, if goods are delivered on a DDP basis (Delivered Duty Paid), it means that the supplier is the importer and needs to register for VAT in the country of import and account for VAT on the import of the goods and the onward supply to the customer.

Perhaps the biggest obstacle to using DDP incoterms is that businesses that are not established in the EU are required to appoint a customs agent which is prepared to act as an Indirect Representative.

Indirect Representatives

One of the greatest challenges experienced by UK businesses seeking to access the EU market post Brexit has been the inability to appoint Indirect representatives to deal with customs entries. The reason for this is that Indirect Representatives act in their own name, they are responsible for making sure declarations are complete and accurate and they are jointly and severally liable for any customs debt.

Roseline Logistics

The recent case of Roseline Logistics Limited v The Commissioners for HMRC [2025] UKFTT 427 highlights why this is a concern.

Roseline made import declarations claiming Postponed VAT Accounting (PVA) on the importer’s behalf. Roseline was instructed to make the PVA claims by an intermediary and had no direct contact with the importer.

PVA allows VAT-registered importers to account for import VAT through their VAT return rather than paying at the point of import. However, the importer in Roseline was not VAT-registered at the time, and thus not entitled to use PVA.

HMRC issued a post-clearance demand note to Roseline for £1.1 million in unpaid import VAT arising from the declarations as Roseline participated and was involved in the breach by making the PVA claims on the importer’s behalf.

Roseline failed to carry out basic due diligence, such as checking the importer’s VAT registration or Companies House status. These were simple and routine steps that would have revealed the client’s ineligibility to use PVA.

Because Roseline skipped these checks, the FTT considered they ‘ought reasonably to have known’ that the declarations were incorrect. Roseline was held joint and severally liable for the full £1.1 million import VAT liability.

Roseline clearly illustrates the need to undertake proper processes and procedures, and they were clearly lackadaisical in their approach. Nevertheless, you can understand why agents see this as a level of risk that they are not willing to accept.

The case also highlights the fact that there was a lack of understanding of basic VAT place of supply rules. If a business is importing on a Delivered Duty Paid Basis (“DDP”) it will be the importer of record and responsible for accounting for VAT on the onward supply. It will therefore need to register for VAT in the country of import unless simplifications such as Regime 42 apply.

Regime 42

Regime 42 had been used extensively by UK (non-EU) businesses to import goods into France without paying import VAT or registering for VAT in France, where those goods were to then be transported to other EU member states. The onward movement of goods qualified for zero-rating as an intra-EU supply of goods. Perhaps more importantly, importers using Regime 42 did not need to appoint an Indirect Representative for customs purposes.

However, on 1 January 2026, France withdrew the use of the Regime 42 for businesses which do not have an establishment in the EU. The withdrawal of Regime 42 has required businesses using France as a gateway to Europe to rethink and restructure their supply chains.

Businesses impacted by the withdrawal of Regime 42 have a number of options:

Register for VAT in France: This requires the importer to appoint an Indirect Representative and submit French VAT returns.
Change the Incoterms and make the customer the importer: This is not an attractive option for the client and may be a deal breaker.
Use Regime 42 DAP: This operates in a similar way, but the end customer uses the simplification and declares the movement of goods.
Use Regime 42 in Belgium: Belgium continues to offer Regime 42, providing a potential alternative route.
Alternative Gateways to Europe: Businesses must evaluate which jurisdictions offer the most efficient combination of access and compliance burden. For UK businesses, the Netherlands presents opportunities.

Summary

As can be seen from above, there are many complexities arising from trading cross border. These include VAT registration, the appointment of agents and time and place of supply for VAT purposes. The withdrawal of Regime 42 by France may be a catalyst to review supply chains for clients to make sure that they are efficient and cost effective. By improving supply chains it is possible to reduce the cost of VAT and duty which in turn can contribute to reduced costs or increased profits and which business does not want that?