Zero rating goods sold to EU VAT registered businesses
Under the transitional Brexit arrangements EU rules for customs, VAT and excise will continue to apply to the movement of goods from the UK to the EU until 31 December 2020. There have been some recent changes to the rules.
Prior to 1 January 2020 where a UK business supplied goods to a customer in another EU member the supply could be zero rated provided:
- the customer’s EU VAT registration number, including the 2-letter country prefix code, was obtained and was shown on the VAT sales invoice
- the goods were sent or transported out of the UK to a destination in another EU member state
- valid commercial evidence that the goods had been removed from the UK was obtained within the specified time limits (normally three months) and was retained
With effect from 1 January 2020 in order to qualify for zero rating will also be a requirement that an accurate EC Sales List declaring the supply is submitted to HMRC.
If a supply is not correctly reported on an EC Sales List zero rating becomes invalid and will be cancelled. The effective date of cancellation will be the date of the original supply.
If HMRC discover a business has failed to meet any of the conditions for zero rating, including submitting an accurate EC sales list, they could issue an assessment for the VAT due on the transaction and may charge interest and penalties.
Where an EC Sales List is corrected at a later date, zero rating can be reinstated from that date as long as all the other conditions for zero rating are met.
This means it is essential businesses ensure EC sales lists are accurately completed and submitted to HMRC if sales of goods are to be zero rated.
Changes to Netherlands VAT identification numbers
New VAT identification numbers, which are valid from 1 January 2020, have been issued to self-employed people and sole traders in the Netherlands.. From 1 January 2020 it is important that the new VAT identification number is shown on VAT sales invoices and is being declared on the UK EC sales lists to qualify for zero rating.
You can check whether the VAT identification number you are using is still valid using the VIES VAT number validation website.
Some other changes have been made for intra-EU chain transactions and in relation to the documentary evidence required to show goods have been removed from the UK.
If you would like to know more about any of these issues please get in contact.