How will a no-deal Brexit impact VAT?
With the deadline of 31st October 2019 fast approaching, the UK has still not made any clear announcements on what the next steps are in relation to whether there will be a no-deal Brexit or an extension to the current deadline.
It is important that businesses consider how a no-deal scenario could affect them and begin to take steps to mitigate against risks.If the UK leave the EU without a deal the government’s aim will be to keep VAT procedures as close as possible to what they are now in order to provide continuity and certainty for businesses.
However, if the UK leaves the EU with no agreement, there will be some specific changes to VAT rules and procedures that apply to transactions between the UK and EU Member States. Some of these changes are outlined below:
- Postponed accounting will be introduced for import VAT on goods brought into the UK. UK VAT registered businesses importing goods to the UK from EU or non-EU countries will account for import VAT on their VAT return rather than paying import VAT when the goods arrive at the UK border.
- VAT will be payable on goods entering the UK as parcels sent by overseas businesses, unless they are already relieved from VAT under domestic rules – zero-rated children’s clothing). Low Value Consignment Relief (LVCR) will not be extended to goods entering the UK from EU. For parcels valued up to and including £135, a technology based solution will allow VAT to be collected from the overseas business selling the goods into the UK. Overseas businesses will charge VAT at the point of purchase and will be expected to register with an HMRC digital service and account for VAT due. On registration, businesses will be provided with a Unique Identifier which will accompany the parcels they send to the UK. They will then declare the VAT due on those parcels and pay this via their online account.
- On goods worth more than £135 sent as parcels - VAT will continue to be collected from UK receipts in line with current procedures for parcels from non-EU countries.
- Distance selling arrangements will no longer apply to UK businesses and UK businesses will be able to zero rate sales of goods to EU consumers. EU member states will treat goods entering the EU from the UK in the same way as goods entering from other non-EU countries with associated import VAT and customs duties due when the goods arrive into the EU.
- UK businesses will no longer have access to the EU VAT refund system. They will continue to be able to claim refunds from EU Member States but will be required to use the existing processes for non-EU businesses. This process varies across the EU and businesses will need to make themselves aware of the processes in the individual countries where they incur costs and want to claim a refund.
- Businesses that sell digital services to consumers in the EU will no longer be able to use the UKs Mini One Stop Shop (MOSS) portal to report and pay VAT. Businesses that want to continue to use the MOSS system will need to register for the VAT MOSS non-Union scheme in an EU member state. Alternatively a business can register in each EU member state where sales are made.
For more information on how VAT may be impacted after Brexit, get in touch with out team of VAT experts below.