Brexit is in the headlines again and it is clear that despite claims to the contrary it has not been “done”. Sound bites from both sides make it clear that time is running out to agree a trade deal so those businesses who can should now be making preparations for a hard Brexit- the worst case scenario.
The following is a brief summary of what will happen in practical terms for VAT accounting if we fail to get a deal before the end of the Transitional Period (currently 31st December 2020).
- Imports and exports replace zero rated intra-community trade,
- Depending on your contractual terms and Incoterms, you may be required to register for VAT in the EU,
- EU Simplifications which avoid multiple EU VAT registrations will no longer be available to businesses in the UK, e.g. Triangulation, Distance Selling and MOSS,
- No online refunds of EU VAT. Refunds of VAT incurred in the EU will only be available through the 13th Directive refund scheme – a paper based system,
- Potentially, no more Intrastat or EC Sales lists although it is understood HMRC might continue with these.
To a certain extent this should be just a matter of getting up to speed on the new requirements in terms of documentary evidence and using the correct forms but one of the key questions for many will be – do I need to be registered for VAT somewhere else?
Businesses should review their supply chains now if they have not already done so. If you import from the EU, you will need a UK EORI number and if you export to the EU you will need an EU EORI number. Your contractual arrangements and the Incoterms you use should be reviewed carefully to ensure you understand the implications for VAT. For example, if you sell DDP, or sell from a consignment stock in your customer’s country within the EU you are likely to be required to be VAT registered in the customers country.
If you sell online into the EU and currently charge UK VAT because you’re under your customer’s EU Distance Selling threshold you will be required to register for VAT in that country immediately regardless of how much business, you do there. Unfortunately, the same is true for those supplying electronically supplied services to customers in the EU. Currently UK MOSS avoids the need for multiple VAT registrations, but this will go too.
The simple solution to this could be to register for VAT somewhere within the EU but even that could be a complex and potentially expensive decision – 19 of the remaining 27 Member States require you to use a Fiscal Representative.
If you need help with preparing for a No deal Brexit contact Ellen on 0345 177 5500, or email@example.com