VAT changes post Brexit

We've already discussed the VAT changes post Brexit for digital services previously. In this post we're going to discuss the the impact of VAT changes post Brexit for other businesses. 

VAT changes Post Brexit

VAT and service businesses

From 1 January 2021 the VAT rules for supplying services to the UK and EU are similar to those existing rules for supplying services from the UK to outside the EU. In other words, they are treated as outside the scope of UK VAT.

However, there are several notable exceptions, namely the following:

  • Certain B2C services such as accountancy and consulting change from being standard rated to outside the scope of UK VAT.
  • You can read about the changes to digital services here
  • The supply of financial and insurance services changes from an exempt supply to outside the scope of VAT. This means input VAT recovery may now be possible 

VAT and exporting goods to the EU

If you are a UK e-commerce business selling to customers in the EU the distance selling rules may have been relevant previously. 

Prior to 1 January 2021 a UK VAT registered business that had relatively low sales to other EU countries could benefit from the distance selling thresholds. 

Sales within the distance selling thresholds were subject to UK VAT unless the supplier decided to register for VAT in the EU country of destination. 

However, from 1 January 2021 EU countries are treated the same as non-EU countries. Therefore, any goods leaving GB for the EU (though see below for Northern Ireland) will now be considered 'exports'. The government have produced a useful guide which you can see here

Post Brexit, selling goods to the EU now presents the following complications.

  • It will be necessary to charge VAT at the local rate applicable to the country the goods arrive in. 
  • The importer of record pays the Import VAT on arrival of the goods. This can be recovered if the customer is registered for VAT (though see below). However to become an importer of record you will need an agent in the country to which you're exporting. 
  • Any B2C sales in the EU will be affected as the customer will be charged duty plus VAT.
  • Whilst UK VAT registered businesses no longer have to complete an EC Sales List if you are exporting zero-rated goods to the EU you'll need to retain evidence proving the goods have left the UK. 

Zero-rating of goods

Provided certain conditions are fulfilled, the export of goods can be zero-rated for VAT purposes. However records will need to be kept to prove this. 

You'll need official or commercial evidence (for example from a customs system or certificates of shipment) to prove the entitlement to zero-rating. Additionally the goods must be exported from GB (and evidence obtained) within the specified time limits. Depending on the goods exported, this is either three or six months.

If you fail to meet the conditions or retain sufficient evidence then the any sales will be treated as standard rated (if normally standard-rated when supplied in the UK). Any zero-rated supplies must still be accounted for on your VAT returns even if there is no VAT liability.

VAT position for Northern Ireland post Brexit

 As Northern Ireland (NI) will continue to operate as part of the EU VAT area the rules on exporting to the EU will not change. However Northern Ireland is also part of the UK VAT system. This means VAT must be applied to supplies of goods as it is in the rest of the UK. If the supply of goods is moved through NI to the EU, this will be a zero-rated supply as noted above.

For more useful information, check out our Ebooks here.

And if you'd like to know how we can help you with all of this, or with anything else, feel free to give us a call on 01202 048696 or email us at [email protected].

Alternatively, please feel free to complete our Business Questionnaire here.

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