Brexit and VAT

BREXIT AND VAT

In the event of a no deal Brexit if you move goods to or from the EU these will be treated as exports and imports and will be subject to the same customs rules that currently apply to non EU movements.

Goods that are imported and exported into the UK go through customs twice:

  • once when they leave the territory from which they are exported
  • once when they enter the territory to which they are imported.

UK businesses exporting goods from, or importing goods into, the UK will need an EORI number from the UK to submit a customs declaration to UK customs.

HMRC has automatically allocated an EORI number to many VAT registered businesses and is sending letters to these businesses to advise them of their assigned UK EORI number.

Every business will need an EORI number to move goods into or out of the EU after Brexit even if your business is not VAT-registered. Getting an EORI number is a relatively easy online process

Most UK businesses will not need to submit customs declarations to EU customs and so will not need an EORI number from the EU. The business they are trading with will normally submit the EU customs declaration.

However there are some circumstances where UK businesses will need to submit a customs declaration to the EU and so will need to register for an EORI number from the EU as well. For example:

  • If a UK business with a French branch exports goods from the UK to its French branch, then it will be responsible for making an export declaration to UK customs and an import declaration to French customs. So it will need an EORI number issued by the UK and an EORI number from the EU.
  • Some sale contracts may state that either the buyer or the seller are responsible for both the export declaration and import declaration. The responsibilities of each party are often set out in a sale contract using ‘Incoterms’, an international set of trading terms and conditions used in international trade. If the UK business is responsible for both the export declaration and import declaration then it will need both an EORI number issued by the UK and an EORI number from the EU.

If there is a no deal Brexit the government will introduce postponed accounting for import VAT on goods brought into the UK. This means that UK VAT registered businesses pay and, where entitled, reclaim import VAT on their VAT return. This avoids paying the import VAT on or soon after the time that the goods arrive at the UK border and reclaiming it through the VAT return.

This will apply both to imports from the EU and non-EU countries.

There are some schemes such as the ‘Transitional simplified procedure’, which reduces the amount of information needed at the border, and the Duty Deferment account, which allows you to defer the payment of any import duty, that may be of assistance.

SERVICES

The rules around the ‘place of supply’ of services will continue to apply in broadly the same way that they do now. There may be some changes including the input VAT deduction rules for financial services supplied to the EU.

Suppliers of digital services to consumers in the EU will not be able to report these sales via the UK’s One Stop MOSS portal. Alternative arrangements for reporting these sales will have to be made.

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.

Businesses will not be able to use the HMRC online VAT service to claim a VAT refund from an EU member state after 5pm on 31 October 2019 if the UK leaves the EU without a deal on that date.

GOVERNMENT GUIDANCE

The Government has issued a Brexit Checklist that gives general advice for businesses that trade with the EU and they also have a page specifically relating to VAT if there is a no deal Brexit

Should you have a query or wish to discuss anything mentioned above in more detail, please contact us.

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