BREXIT PAPERS: VAT for businesses in the event of a no-deal

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The government have produced a number of papers about what might happen if the UK were to leave the EU with a “no-deal” scenario.  The government remains adamant that a no-deal situation is unlikely to happen, but putting our boy scout hat on it’s best to be prepared.  The full list of papers can be found here:

https://www.gov.uk/government/collections/how-to-prepare-if-the-uk-leaves-the-eu-with-no-deal

This week we are specifically look at VAT for businesses in the event of a no-deal situation.  Firstly, if you are a UK business with no imports/exports then nothing will change.

The current rules remain valid and in place up to 29 March 2019 and as a reminder these are:

  • 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. There are different rules 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 that are exported by UK businesses to EU consumers have either UK or EU VAT charged, 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.

After 29 March 2019, if there is no deal then the UK will continue to have a VAT system and the VAT rules relating to UK domestic transactions will continue to apply.  If there is no deal, then the government state that their aim is to keep VAT procedures as close as possible to what we currently have so as to provide continuity and certainty for businesses.

If there is a no-deal situation then:

  • The current rules for imports from non-EU countries will also apply to imports from the EU. 

  • The government will introduced postponed accounting for import VAT on goods brought into the UK so that UK VAT registered businesses can account for import VAT on their VAT returns rather than having to pay import VAT when the goods arrive at the UK border, they say that this will apply to imports from both the EU and non-EI countries.  This should help alleviate any cashflow issues as it will keep the VAT processes as close as possible to those currently in place.

  • Distance selling arrangements will no longer apply to UK businesses and they will be able to zero-rate the sales of goods to EU consumers.  Within the EU, these imports will be treated as another non-EU import and local VAT and customs duty may be charged to the consumer.

  • UK businesses will continue to be able to zero-rate sales of goods to EU businesses.  UK businesses will need to ensure that they have sufficient records to support and evidence that the goods have left the UK (as is currently required for non-EU sales).

  • The main VAT place of supply for UK businesses supplying services into the EU will remain unchaged.  Currently the place of supply rule determes the country in which you need to charge and account for VAT and this will remain unchanged.

These are the five key points, the full guidance can be found at: https://www.gov.uk/government/publications/vat-for-businesses-if-theres-no-brexit-deal/vat-for-businesses-if-theres-no-brexit-deal

 

 

 

Rachael Savage