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

3 September 2018

Exporting goods to EU consumers

Distance selling will no longer apply to UK businesses. The sale of goods to consumers will be treated as an export and will be zero rated provided certain conditions are met. Under current EU rules, the import taxes will be due on arrival into the EU Member State.

UK businesses exporting goods to EU businesses

Such transactions will be treated the same as goods entering the EU from non-EU countries – the sale will be zero rated but the customer will pay import VAT and customs duties when the goods arrive. There will no longer be a requirement to complete an EC Sales List.

The zero rating will apply providing that the seller retains proof of export and the goods are exported within specified time limits. UK businesses should check the relevant import VAT rules in the EU Member State to ensure that their customers understand the new rules.

UK businesses selling their own goods in an EU Member State to customers in that Country

This covers all UK businesses that are using fulfilment centres and such like in the EU. Such businesses would be required to register for VAT in each Member State concerned and charge VAT at the local rate in that Member State.

Place of supply rules for UK businesses supplying services into the EU

The current VAT ‘place of supply’ rules will continue to apply to UK businesses. These rules determine the country in which you need to charge and account for VAT.

For B2C supplies of digital services, the place of supply will be where the customer resides. This means that UK businesses may have a liability to register for VAT in the EU States where digital services are being sold directly to the individual.

It is anticipated that there may be changes to the input tax deduction rules for businesses supplying insurance and financial services to EU customers. HMRC will advise on this in the coming months.

EU Tour Operators Margin Scheme

HMRC are working closely with tour operators to minimise the impact should the UK leave the EU with ‘no-deal’.

Interacting with EU VAT IT systems

In the event of a ‘no-deal’ outcome, the UK will no longer be part of EU VAT IT systems.

MOSS – There will be the introduction of the MOSS Non-Union Scheme and businesses will register for that via a Member of the EU.

EU VAT refund scheme – Businesses can continue to claim VAT refunds from other EU Member States but they will use the process for non-EU businesses. This claim process varies from State to State.

Using VIES on the EU Commissions website to validate EU VAT numbers – This database will continue to be accessible by all businesses. HMRC are in the process of developing a tool to ensure that UK VAT numbers can be verified.

Although the UK government manifests to be in the process of arranging trade deals with EU Commission, it is important that businesses understand the potential impact of a ‘no-deal’ Brexit and start to take the relevant mitigation steps.

There has been strong opposition from the EU’s chief Brexit negotiator Michel Barnier to the main parts of the PM’s proposal for a future trade deal. Does this mean that a ‘no-deal’ Brexit is looming?

Should you have any questions about this blog, please do not hesitate to contact me or your local UHY adviser.

To read part one of this blog, click here.

For more blogs about the implications of Brexit, click here.