VAT for businesses if there’s no Brexit deal
After 29 March 2019 if there’s no deal
This note summarises the main VAT issues that will affect UK businesses trading with the EU in goods and services if the UK leaves the EU without an agreement on 29 March 2019. Although no changes will be made before then, this note highlights the VAT changes that businesses will need to prepare for when importing goods from the EU, exporting goods to the EU, supplying services to the EU, and interacting with EU VAT IT systems such as the VAT Mini One Stop Shop (MOSS). This technical notice details potential changes in each of these areas.
UK businesses importing goods from the EU
In a no deal scenario the current rules for imports from non-EU countries will also apply to imports from the EU, some additional changes are outlined below. Businesses that import goods into the UK may wish to also consult the ‘Trading with the EU if there’s no Brexit deal’ technical notice which covers import processes at the border.
Accounting for import VAT on goods imported into the UK
If the UK leaves the EU without an agreement, the government will introduce postponed accounting for import VAT on goods brought into the UK. This means that UK VAT registered businesses importing goods to the UK will be able to account for import VAT on their VAT return, rather than paying import VAT on or soon after the time that the goods arrive at the UK border. This will apply both to imports from the EU and non-EU countries.
In reaching this decision, the government has taken account of the views of businesses and sought to mitigate any adverse cash-flow impacts keeping VAT processes as close as possible to what they are now. To ensure equity of treatment, in a no deal scenario, businesses importing goods will be able to account for their import VAT from non-EU countries in the same way, which will help UK businesses make the most of trading opportunities around the world. Customs declarations and the payment of any other duties will still be required and more detail on these processes can be found in the ‘Trading with the EU if there’s no Brexit deal’ technical notice. More guidance setting out further detail on accounting and record keeping requirements will be issued in due course.
VAT on goods entering the UK as parcels sent by overseas businesses
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 HM Revenue & Customs (HMRC) digital service and account for VAT due.
The digital service is an online registration, accounting, and payments service for overseas businesses. On registration, businesses will be provided with a Unique Identifier which will accompany the parcels they send in 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 recipients in line with current procedures for parcels from non-EU countries, guidance on these procedures can be found here in HMRC notice 143.
VAT on vehicles imported into the UK
The rules on the movement of goods to the UK from the EU will change when the UK leaves the EU and as a result, import VAT will be due on vehicles you bring into the UK from EU member states. Certain reliefs will also be available as with current imports of vehicles from non-EU countries. Businesses will need to continue to use NOVA to verify that VAT is correctly paid on imported vehicles.
UK businesses exporting goods to the EU
This section provides information about accounting for VAT on goods exported to the EU, and the rules and procedures that will apply. UK businesses may need to plan for customs and VAT processes, which will be checked at the EU border. So they should check with the EU or Member State the rules and processes which need to apply to their goods.
UK businesses exporting goods to EU consumers
If the UK leaves the EU without an agreement, 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.
Current EU rules would mean that 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 exporting goods to EU businesses
If the UK leaves the EU without an agreement, VAT registered UK businesses will continue to be able to zero-rate sales of goods to EU businesses but will not be required to complete EC sales lists.
As UK VAT registered businesses will not be required to complete an EC sales list, there will be changes to how these sales are recorded. Those UK businesses exporting goods to EU businesses will need to retain evidence to prove that goods have left the UK, to support the zero-rating of the supply. Most businesses already maintain this evidence as part of current processes and the required evidence will be similar to that currently required for exports to non-EU countries with any differences to be communicated in due course.
Current EU rules would mean that 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. Individual EU member states may have different rules for import VAT for non-EU countries and import VAT payments may be due at the border when importing goods. UK businesses should check the relevant import VAT rules in the EU Member State concerned.
UK businesses selling their own goods in an EU Member State to customers in that country
If the UK leaves the EU without an agreement, UK businesses will be able to continue to sell goods they have stored in an EU Member State to customers in the EU in line with current Rest of World rules.
Current EU rules would mean that UK businesses will continue to be required to register for VAT in the EU member states where sales are made in order to account for the VAT due in those countries.
You can find further information on EU rules for storing non Union goods in an EU Member State before selling or exporting on the EU Commission’s website.
You can find further information on registering for VAT in EU member states on the EU Commission’s website.
UK businesses supplying services into the EU
This section provides information about accounting for VAT on services supplied into the EU, and the rules and procedures that will apply.
Place of supply rules for UK businesses supplying services into the EU
The rules around ‘place of supply’ will continue to apply in broadly the same way that they do now, areas of potential change are flagged below.
For UK businesses supplying digital services to non-business customers in the EU the ‘place of supply’ will continue to be where the customer resides. VAT on services will be due in the EU Member State within which your customer is a resident.
For UK businesses supplying insurance and financial services, if the UK leaves the EU without an agreement, input VAT deduction rules for financial services supplied to the EU may be changed. We will update businesses with more information in due course.
EU Tour Operators’ Margin Scheme
The Tour Operators Margin Scheme is an EU VAT accounting scheme for businesses that buy and sell on certain travel services that take place in the EU. HMRC has been engaging with the travel industry and will continue to work with businesses to minimise any impact.
UK businesses that access EU-wide VAT IT systems
If the UK leaves the EU without an agreement, the UK will stop being part of EU-wide VAT IT systems such as the VAT Mini One Stop Shop, more detail for specific EU-wide VAT IT systems is set out below.
UK VAT Mini One Stop Shop (MOSS)
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. This can only be done after the date the UK leaves the EU. The non-union MOSS scheme requires businesses to register by the 10th day of the month following a sale. You will need to register by 10 April 2019 if you make a sale from the 29 to 31 March 2019, and by 10 May 2019 if you make a sale in April 2019.
Alternatively, a business can register in each EU Member State where sales are made. You can find further information about registering for VAT in EU member states on the EU Commission’s website.
EU VAT refund system
UK business will no longer have access to the EU VAT refund system.
UK businesses will continue to be able to claim refunds of VAT from EU member states by using 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.
You can find further information about claiming VAT refunds from EU member states on the EU Commission’s website.
EU VAT Registration Number Validation - accessed via the EU Commission’s website
UK businesses will be able to continue to use the EU VAT number validation service to check the validity of EU business VAT registration numbers. UK VAT registration numbers will no longer be part of this service. In the event of no agreement HMRC is developing a system so that UK VAT numbers can continue to be validated. We know this is important for certain businesses to carry out due diligence.
Businesses in Northern Ireland importing and exporting to Ireland
The UK government is clear that in a no deal scenario we must respect our unique relationship with Ireland, with whom we share a land border and who are co-signatories of the Belfast Agreement.
It is the responsibility of the UK government to continue preparations for the full range of potential outcomes, including no deal. In such a scenario, the UK would stand ready to engage constructively to meet our commitments and act in the best interests of the people of Northern Ireland, recognising the very significant challenges that the lack of a UK-EU legal agreement would pose in this unique and highly sensitive context. This would include engagement on arrangements for land border trade. We will provide more information in due course.
The Irish government have indicated they would need to discuss arrangements in the event of no deal with the European Commission and EU member states. We would recommend that, if you trade across the land border, you should consider whether you will need advice from the Irish government about preparations you need to make.