VAT after Brexit, what’s going to change?

Now that Britain has left the European Union, there will be a flurry of changes coming to the UK VAT system as Britain aims to withdraw from the EU VAT Directive. While this is not due to occur until the 31st of December 2020, for VAT-registered businesses that do trade within the EU under the current rules some planning and preparation will be required if they aim to continue trading with the EU after Brexit.

What’s coming?

Separating the UK’s VAT system from the EU is a complicated procedure and there will be several things for UK businesses to consider going forwards:

  • The end of the zero-rated B2B intra-community supply – under current rules most business to business goods transactions across EU borders can be zero-rated under the reverse-charge rules. This process is due to end and all UK imports and exports will be subjected to import VAT rules at the border of their destination country. The UK is introducing a deferral scheme for EU businesses importing goods to the UK so no cash payment for VAT will need to be paid at the border, however the reverse may only apply for UK exporters to select EU countries.
  • The end of the UK’s membership of the EU Mini One-Stop-Shop. For a wide range of digital service providers and broadcasters selling across borders within the EU, the MOSS scheme has allowed them to file and pay their VAT Returns in one place. Going forwards these UK-based businesses will need to register a non-Union MOSS scheme to declare their sales in the EU.
  • The 8th Directive online VAT Reclaim System that was previously used for reclaiming EU VAT on travel expenses will be replaced with the 13th Directive paper reclaim process. These paper-based returns will need to be filed quarterly in order to claim back VAT on EU travel.
  • Ecommerce business will need to consider the loss of the Distance Selling thresholds – for UK businesses this means that they will need to register for VAT in the EU in order to continue trading, and any goods that they import will now be subjected to import VAT. The low-value consignment stock relief that previously exempted goods valuing under £15 will also be scrapped, and any parcels containing goods valued at £135 or less will need their import VAT paying by the supplier.

Along with these changes, UK businesses that have a foreign VAT registration may need to appoint a fiscal representative in order to continue trading in EU countries. This representative would report to the tax authority of the host country and would be jointly liable for any VAT payments required to be made by the company.

Whilst this list is not completely exhaustive, it does demonstrate the scope of the UK’s integration into the EU’s VAT system and the need to prepare for new systems in order to continue trading with EU countries. If you require any advice or help in preparation for the coming changes, please feel free to get in touch with us.