VAT for businesses (in the event of a no deal Brexit)

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As we approach 29 March 2019, the government has released plans for all eventualities including what will happen to VAT for businesses should negotiations end with a no-deal Brexit.

If this happens, there will be significant changes to VAT so it’s important businesses consider how a no-deal scenario might affect them, and begin to take appropriate steps to prepare.

Below we highlight key changes you need to be aware of.

VAT right now

Businesses with a turnover of more than £85,000 must register to pay and charge VAT on the products and services they buy and sell. Under the current rules:

VAT is charged on most goods and services sold within the UK and the EU
VAT is payable by businesses when they bring goods into the UK. The rules differ depending on whether the goods come from an EU or non-EU country
Goods that are exported by UK businesses to non-EU countries and EU businesses are zero-rated, meaning that UK VAT is not charged at the point of sale
Goods exported by UK businesses to EU consumers are subject to either UK or EU VAT (subject to distance selling thresholds)
For services the ‘place of supply’ rules determine the country in which you need to charge and account for VAT.

VAT after 29 March 2019

In the event of a no-deal Brexit, there will be changes to VAT rules and procedures that apply to transactions between the UK and EU member states. Some of the key changes include:

Accounting for import VAT (on goods imported into the UK)

UK VAT registered businesses importing goods to the UK will be able to account for import VAT on their VAT return, rather than paying for this immediately or soon after the goods arrive in the UK. The rule will apply to imports from EU and non-EU countries.

UK businesses exporting goods to EU consumers

Distance selling arrangements will no longer apply to UK businesses. Goods entering the EU from the UK, will be treated as goods entering from non-EU countries, with associated import VAT and customs duties.

UK businesses exporting goods to EU businesses

UK VAT registered businesses will be able to continue trading with zero-rate sales without completing the EC sales lists – but there will be changes to how these sales are recorded. UK businesses exporting goods to EU businesses will need to retain evidence proving goods have left the UK in order to support the zero-rating of the supply.

Place of supply rules (for UK businesses supplying services to the EU)

Most of the VAT place of supply rules will remain the same – including the supply of digital services to non-business customers in the EU.

UK VAT Mini One Stop Shop (MOSS)

Businesses will no longer be able to use the UK’s MOSS portal to report and pay VAT on sales of digital services to consumers in the EU. Businesses wishing to continue using the MOSS system will need to register for the VAT MOSS non-union scheme (this can only be done once the UK leaves the EU).

EU VAT registration number validation (accessed via the EU Commission’s website)

UK businesses will be able to continue using the EU VAT number validation service to check the validity of VAT registered EU businesses. HMRC is currently developing a service where UK VAT numbers can be validated.

For further details check out HMRC’s VAT for business in the event of a no deal Brexit

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