Our VAT guide for businesses in case of a ‘no-deal’ Brexit – part one

3 September 2018

The government has released plans for what will happen, should the UK leave the EU on 29 March 2019, without reaching an agreement on the details of a future trading relationship; effectively a ‘no-Brexit’ deal.

Hopefully, the mutual interests of both parties involved will help in securing a negotiated outcome, however, a ‘no-deal’ situation remains a possibility. The following plans have been issued, should both parties fail to reach an agreement:

  • The current VAT system in the UK will remain after it leaves the EU, as this provides vital funding for public services. Current VAT rules relating to domestic transactions will continue to apply.
  • In a ‘no-deal’ scenario, the government will aim to keep VAT systems and procedures as similar as possible to current systems, with the main purpose of providing continuity for businesses. However, the VAT rules that apply to transactions between the UK and other EU countries will change, particularly when importing goods from the EU, exporting goods to the EU, supplying services to the EU and interacting with EU VAT IT systems.

Importing goods from the EU

The released plan outlines that the government will introduce postponed accounting for import VAT on goods brought into the UK, meaning that UK VAT registered businesses will be able to account for import VAT on their VAT return, rather than paying it when the goods arrive in the UK. The purpose of the postponed accounting system is to improve cash flow, so that businesses will no longer have to pay import VAT at the time of arrival and wait until their next VAT return to reclaim it.

This will apply to goods brought in from both EU and non-EU countries. Importers will no longer be required to pay import VAT when their goods arrive into the UK. The new rules will not affect any of the other import taxes. Such taxes will remain payable at the time of import.

VAT on goods entering the UK as parcels sent by overseas businesses

Low value consignment relief will be abolished and all parcels coming into the UK will be subject to UK VAT. These measures bring the UK in line with the rest of the world. The seller will be responsible for charging UK VAT to the UK customer at the point of sale. There is a requirement for such businesses to register for VAT in the UK and account for VAT via a technology based solution. It is proposed that each seller will be given a unique identifier. These guidelines are for parcels with a value of less than £135. This scheme will ensure that VAT can be collected on such transactions without becoming a burden to UK customers and businesses. The service will be available from early 2019, enabling businesses to familiarise themselves prior to registering.

Parcels with a value in excess of £135 will be subject to import VAT and duty (and any other import taxes) at the time of import.

VAT on vehicles imported into the UK

UK businesses will continue to use the NOVA (notification of vehicles arrivals) system to notify HMRC that a vehicle has arrived in the UK from abroad. Import VAT will be due on the importation of vehicles from the EU.

For more information about this blog, contact me or your local UHY adviser.

Click here to read part two.

To read more blogs about the implications of Brexit, click here.