VAT and the B word

11th October 2018

With the ongoing uncertainty over the Brexit negotiations it has been very difficult, if not impossible, for us to advise clients on how to plan for life outside the EU.  We now have some HMRC-published guidance that attempts to explain how the VAT landscape may look if we exit without a deal.  Of course for planning purposes this is still of limited use, as it only covers one potential scenario.

The main, relevant, areas covered by the guidance are:

  • UK businesses importing goods from the EU. The special rules that currently apply to these goods would cease to exist and the rules applying to import of goods from outside the EU would come into force.  This means that VAT would become due from the UK customer at the point of import.  It would then be recoverable in the usual way.

In these circumstances the proposal would be for the introduction of new procedures that would allow VAT to be accounted for on the VAT return rather than being payable at the border to get the goods released.

  • Exports of goods to EU consumers will no longer be subject to the distance selling rules and instead should be zero rated
  • Exports of goods to EU businesses will continue to be zero rated. There would no longer be a requirement to maintain an EC Sales list or Intrastat Return.  It will however still be necessary to retain evidence that goods have left the UK.
  • UK businesses supplying services to the EU should be largely unaffected as the rules on place of supply are not expected to change.
  • Where UK businesses supply digital services to non-business customers in the EU the place of supply will continue to be the country in which the customer lives. At present this is dealt with under MOSS.  However post-Brexit the UK will no longer be part of this scheme so businesses would have to register for the MOSS Non-Union Scheme in an EU state.  This cannot be done until after we leave the EU, but registration must take place by the 10th of the month following the sale.  This means that if sales are made on the 29th, 30th or 31st of March 2019 the business will have to register by 10th

How much effort should be put into planning for any of the above is a moot point, given the state of negotiations.  We will of course be publishing updates as and when the future relationship with the EU becomes clearer.

Alan Nesbitt, Partner

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