VAT consequences of 'no deal' Brexit

On 23 August 2018, the Government published a series of technical notices providing guidance on how UK businesses and citizens may be affected if the UK leaves the EU without a deal on 29 March 2019.

We have summarised how this could impact VAT below:

Businesses importing goods into the UK from the EU

• The current VAT rules applying to imports from outside the EU will be followed for imports from EU countries when the UK leaves the EU.
• Postponed accounting will be implemented for both EU and non-EU imports. This means that VAT will be accounted for in VAT returns, rather than payment being due at the time of import. Customs declarations and other duties will still be required on entry. This represents a considerable cash flow saving.
• For parcels from overseas businesses: VAT will be collected from the UK recipient (in line with current non-EU parcels practice) for items valued over £135. Otherwise, the overseas business will account for the VAT due using an online accounting service.

Businesses exporting goods to the EU from the UK

• The current VAT rules applying to exports to outside the EU will be followed for sales to EU countries, ie supplies will be zero-rated with no VAT charged.
• Distance selling rules will no longer apply to UK businesses and therefore sales to consumers in the EU will not need to be monitored. Rules for parcels outlined above will apply in the customers EU country.
• No EC Sales Lists will be required for sales to EU business customers.

Evidence of removal of goods from the UK will need to be obtained for all goods exported in order to obtain zero-rating. Please note that this may require a specific process change for many businesses.

Businesses providing services to EU based customers

• The general place of supply rules will remain unchanged.
• No EC Sales Lists will be required for sales to EU business customers.
• The input VAT deduction rules for specified financial services provided to EU based customers may be changed, further guidance will be released on this.

Mini One Stop Shop (MOSS)

• The UK MOSS system will no longer be available.
• Any UK business making supplies of electronically supplied digital services in the EU will need to register for the non-Union MOSS scheme in an EU Member State after the UK has left the EU.

Other issues

• HMRC is still determining the impact on the Tour Operators Margin Scheme.
• UK businesses will no longer be able to use the EU VAT Refund Scheme in EU Member States, the non-EU VAT Refund Scheme should be used.
• UK VAT registration numbers can no longer be verified on VIES. HMRC will establish a new system for checking the validity UK VAT registration numbers.

Working with you – can we help?

At Smith & Williamson, we understand that every business is unique and that different businesses will be impacted by Brexit in different ways.

We can review current business arrangements to provide Brexit scenario planning, structuring and wider tax advice.

If you are interested in discussing this further, please let your Smith & Williamson contact know and we can put you in touch with our appropriate specialists.

DISCLAIMER
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.