Category: Taxation

Likely VAT rules in the event of a ‘no deal’ Brexit

By Richard Staunton

12 Mar 2019

With the possibility of a no deal Brexit becoming more likely we have set out what we consider will be the major VAT consequences. Note that the below effectively assumes there are no transitional or minor ‘deals’ and HMRC are consistent with their treatment between EU and non EU sales and purchases.

Please treat the following as a guide. As the situation becomes clearer the website will be updated. In the meantime if you have any queries please speak to your normal GE contact or email VAT@geraldedelman.com

Services

Most services whether to business or non-business customers will be outside the scope of VAT.

No requirement for a business VAT number, and evidence customer is in business. No EC Sales list needed.

For UK businesses supplying insurance and financial services, input VAT deduction will be possible for customers in the EU, along the same rules as currently applies to non EU customers

Note that there are some exceptions to the general rule eg services relating to land the place of supply will be where the land is situated, including admission to events. VAT registration for these services will still apply.

A UK business will no longer be able to use the UK’s Mini One Stop Shop (MOSS) portal to report and pay VAT on sales of digital services to consumers in the EU. 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.

For sales under the Tour Operators Margin scheme, sales in the EU will attach a zero rated margin

Exports of goods

The export of goods to the EU will still be able to zero-rated, but this will also include exports to private individuals. Distance selling thresholds will no longer apply.

Intrastat declarations and EC sales lists will not be required, but evidence of export will still need to be retained.

In addition Customs procedures will need to be followed for these supplies and businesses will need the following;

1.  A valid EORI Number

2.  A licence to export your goods (if required)

3. An export declaration to HMRC using their software or on-line, or get your customs broker, freight forwarder, or logistics provider to do this for you.

Imports of goods

For goods entering the UK from the EU businesses will be subject to customs controls which means that an import declaration will need to be made.

VAT will be due on imports but this will be in the form of a reverse charge. This will apply to imports from EU and non EU countries

Actions that should be taken now to be prepared for the changes:

  1. Register for a UK Economic Operator Registration and Identification (EORI) number, unless you already have an UK or EU EORI number.

  2. Instead of paying import charges at the point of entry, you can apply to use a deferment account to defer payment of duty and VAT.  You will also need a bank guarantee to defer payment.

  3. If you want to declare imports through an agent, appoint one as soon as possible.

  4. If you do not appoint an agent, you should:

  • make sure someone in your business is trained to make customs declarations

  • buy specialist software that links to HMRC’s Customs Declaration Service.

  1. Sign up for Transitional Simplified Procedures to make importing through roll-on, roll-off ports and the Channel Tunnel easier.

  2. Contact HMRC if you have been authorised to use a facilitation, such as Customs Freight Simplified Procedures, to find out how it will be affected.

  3. You may have to obtain licences if you are importing controlled goods, such as animal products, plants, or excise goods like alcohol or tobacco

Please contact Gerald Edelman if your business is affected and we will be able to provide further advice.

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