After two years of uncertainty concerning the UK’s departure from the European Union, the government is busy preparing for all potential outcomes including a no-deal Brexit as the date to leave approaches. As yet, it’s unclear how this will affect UK business exactly, but there are likely to be some changes to the way VAT on imported and exported goods and services are handled if an agreement isn’t reached.
At LWA, we’ve also been preparing for the potential modifications to VAT payments and the need to secure Economic Operator Registration and Identification (EORI) status in the event of a no deal Brexit, so we can support your business through the transition. Here we share what we know so far:
No Deal Brexit VAT
With the position of Prime Minister going vacant, Brexit negotiations remain up in the air and it’s still to be seen whether the UK will leave the European Union with a deal or without one. Although this uncertainty leaves the government and the public with a lot of unknowns, it’s highly likely there will be implications for VAT on goods and services being traded between the UK and EU if a no-deal Brexit is agreed. However, please note, as the changes to border agreements and arrangements remain unknown between Northern Ireland and Ireland, we haven’t commented below on the import and export VAT rules.
Does VAT Change after Brexit?
The UK government are aiming to keep as much continuity as possible with VAT practices, with domestic transactions remaining unchanged. No deal Brexit VAT changes, if they come about, will most likely affect:
If a no-deal Brexit goes ahead, the current VAT rules for non-EU country imports will start to include imports from the EU, but with a few changes:
- The government will introduce postponed accounting. UK VAT registered businesses will be able to account for import VAT on goods from EU and non-EU countries on their VAT return, rather than make an immediate or timely payment once the goods enter the UK border.
- VAT will be payable on parcelled goods sent by overseas businesses with Low Value Consignment Relief (LVCR). Overseas businesses will need to register with an HMRC online service to account for VAT due on parcels up to £135 in value and will remain in line with the current VAT system for parcels over £135 from non-EU countries.
- For vehicle imports, the Notification of Vehicle Arrival Procedures (NOVA) system will remain in place, and import VAT will be due on vehicles brought in from EU member states, but may be subject to certain reliefs used by non-EU countries presently.
Following a no-deal Brexit, the following VAT changes may start to apply to exported goods or services:
- Distance selling arrangements will no longer apply, and UK business will be able to zero rate sales of goods to EU consumers. The EU will attach import VAT and customs duties to goods from the UK in the same way as imports from other non-EU countries.
- VAT registered UK businesses won’t have to complete EC sales lists, but UK businesses should check the relevant import VAT rules for specific EU member states.
- UK businesses will be able to continue to sell goods stored in an EU member state to EU customers in line with Rest of World rules, and UK businesses will need to stay registered for VAT in that EU member state.
- The main VAT ‘place of supply’ rules from the Organisation for Economic Co-operation and Development (OECD) will stay the same for UK businesses. ‘Place of supply’ for digital services will continue to be where the customer resides so VAT is due to the EU member state of residence. For insurance and financial services, the VAT process is unconfirmed. The government is looking at ways to minimise the impact on the current travel services accounting scheme.
EU wide VAT IT systems and UK VAT Mini One Stop Shop (MOSS)
- A no deal Brexit will put an end to reporting and paying VAT via EU-wide VAT IT systems like MOSS for UK businesses selling digital services. If businesses selling a digital service wish to continue selling to EU consumers, they can register with the MOSS non-union scheme, but only after the UK leaves the EU.
VAT Refunds after a No Deal Brexit
- UK businesses will be able to continue to claim VAT refunds from EU member states using the current processes in place for non-EU businesses, but won’t have access to the EU VAT refund system, so the process will vary across EU states.
- UK business will still be able to use the EU VAT number validation service for EU customer and supplier VAT numbers.
Trading with the EU if There’s No Brexit Deal
To continue trading with the EU if there’s no-deal Brexit, UK business importing or exporting physical goods will need to apply for an Economic Operator Registration and Identification (EORI) number if they haven’t already got one. The following businesses will need one if the UK leaves the EU with no deal:
- Businesses who trade goods in to or out of the UK
- Businesses who submit declarations using software (or give to your agent to make these declarations on your behalf)
- Businesses who are applying to be authorised for customs simplifications and procedures.
What is an EORI number?
An EORI number is a method of identification, starting with GB, that will allow UK businesses to trade goods in and out of the UK. It will be stored on a national database and a European Commission database.
How do I check if I have an EORI number?
If you’re not sure whether your business has EORI registration, you can use the EORI number validation checker to check your status.
If you’d like to find out more about the changes to VAT and securing an EORI number for your business ahead of a no-deal Brexit, our expert Corporate and Personal Tax team in Warrington will be able to offer assistance on 01925 830 830, or call our Manchester office on 0161 905 1801, for guidance on the accounting steps you’ll need to take to prepare your business in the event of a no-deal Brexit.