While the domestic VAT rules that impact your business should largely remain unchanged after the UK’s departure from the European Union in 2021, there are notable complexities to consider if you engage in regular import and export activities with the continent. Here are the key changes to be aware of regarding VAT post-Brexit:
1️⃣ Import VAT: Importing goods from the EU now requires paying import VAT at the point of entry into the UK. This ensures that VAT is accounted for in the UK, rather than at the EU’s point of origin.
2️⃣ Export VAT: VAT on goods exported to the EU is generally zero-rated, allowing businesses to sell goods to EU customers without charging UK VAT. However, certain conditions and documentation may be necessary to validate the zero-rating.
3️⃣ VAT on Services: VAT rules concerning the provision of services to EU countries have changed. Depending on the nature of the service, different rules may apply, such as the use of the “reverse charge” mechanism.
4️⃣ EU VAT Registration: If your business is involved in the supply of goods or services to EU member states, you may need to register for VAT in individual EU countries to comply with their respective regulations.
It’s important to stay updated on the specific VAT changes and requirements, as the landscape continues to evolve. Consulting with relevant tax authorities and seeking professional advice can help ensure compliance and minimize any potential disruptions to your business operations in the post-Brexit environment.
New rules around EU import VAT
The UK bid farewell to the EU’s VAT regime in early 2021, marking a significant change in how countries within and outside the EU are treated in terms of value-added tax. This new development ensures that both EU and non-EU nations are on an equal footing when it comes to VAT. As a result, any goods arriving from the EU or any other region are now required to factor in import VAT if their value exceeds £135.
When goods enter free circulation, such as passing through a UK port, they become subject to import VAT. However, you have the flexibility to decide whether to pay the import VAT at this stage and subsequently reclaim it from HMRC using C79 certificates.
Alternatively, since January 2021, the Government has introduced a convenient “postponed accounting” system for VAT. This system grants you the opportunity to account for import VAT using your VAT return, eliminating the need to immediately pay the tax upon the arrival of your goods in the UK and then seek reimbursement.
If your company imports EU goods valued below £135, you can efficiently handle the value-added tax by utilizing the reverse charge procedure and declaring it on your upcoming VAT return. This streamlined approach ensures smooth operations for your business.
Reforms to EU export VAT
If your business engages in cross-Channel trade, it’s crucial to familiarize yourself with the EU export VAT regulations, which took effect in January 2021.
With the new treatment of EU countries on par with non-EU nations, your exports to Europe will be subject to zero-rated UK VAT, resulting in a 0% tax rate. This means you won’t have to pay UK value-added tax on your goods, although you must still include them in your VAT accounting records.
It’s worth highlighting that if you’re directly shipping goods to consumers on the continent, it’s advisable to conduct thorough research to determine whether EU VAT registration is necessary in the countries you serve. This proactive approach ensures compliance with the applicable regulations and facilitates seamless operations for your business.
Why Northern Ireland’s trade rules are different
As part of the negotiated Brexit deal between Britain and the EU, Northern Ireland was granted a unique trade status to prevent the establishment of a rigid customs border on the island of Ireland. It’s essential to consider this aspect when formulating your VAT strategy, and you can find detailed guidance and resources on the official government website to assist you in this process.
By staying informed and accessing the available information, you can effectively incorporate the considerations related to Northern Ireland’s special trade status into your VAT planning efforts
New changes to VAT in 2024
The UK’s VAT laws will see a number of significant adjustments in 2024 as the post-Brexit tax landscape continues to evolve.
Among the VAT changes for 2024 are:
Point-based penalty system