No-Deal Brexit - VAT Do You Do Next?

Along with a number of others, a paper on the likely VAT regime that the UK would face after a no-deal Brexit has been published by the Government on 23 August 2018.

There are various points to note.

Firstly, we will still have VAT after March 2019!

Genuine concerns that VAT would be payable on EU goods at point of import have been allayed. Postponed accounting for import VAT will apply to imports from the EU and, as added “bonus”, from the rest of the world too, which means VAT will paid on both through quarterly or monthly VAT returns instead.

The receipt of small parcels from outside the EU will become more expensive as Low Value Consignment Relief is being scrapped. Parcels valued at £135 or less will have VAT accounted for by the foreign supplier through unspecified technological means but if the value is over that amount it will fall to the recipient.

For businesses exporting goods to the EU, these will be treated as zero rated for UK VAT purposes whether the sale is to a consumer or a business. The need to complete an EC sales list will disappear, although other evidence of export will still be required.  The distance selling regime will no longer apply. Upon the goods entering the EU, they will be subject to each individual countries rules for import VAT for non EU countries, which will increase the burden on the importing business.

The place of supply rules for services will largely continue in place. For businesses supplying digital services to consumers in the EU, they will no longer have access to the MOSS system through the UK portal and will, instead, have to consider registering for VAT in each country in which they do business or register in an EU member state for the VAT MOSS non-Union scheme.

There will no longer be the ability to use the online EU VAT refund system and businesses seeking refunds in the EU will require to use whichever method the individual country requires for non-EU businesses.

VAT is, of course, only one component of the import/export tax system. Customs and excise duties will be more cumbersome but that is for another blog.