If the UK leaves the EU without an agreement in place after 29 March 2019, the government will introduce postponed accounting for import VAT on goods being brought into the UK and UK businesses will no longer be able to use the MOSS portal to pay VAT on sales of digital services, according to one of the many no deal Brexit papers released
The government has confirmed that the UK will continue to have a VAT system even if there is no deal after 29 March 2019 with VAT rules relating to UK domestic transactions continuing to apply to businesses as they do currently.
The aim is to keep VAT rules and procedures as close as possible to what they are now to provide continuity to businesses however if there is no agreement there will have to be some changes to VAT rules and procedures that apply to transactions between the UK and EU member states.
For UK businesses importing goods from the EU the current rules for imports from non-EU countries will also apply to imports from the EU. Postponed accounting for import VAT will be introduced meaning that UK VAT registered businesses importing goods to the UK will be able to account for import VAT on their VAT return, rather than paying import VAT on or soon after the goods arrive at the border.
The government has said that, to ensure equity of treatment, businesses importing goods from non-EU countries will be able to account for import VAT in the same way.
VAT will still be payable on goods entering the UK as parcels sent by overseas businesses.
Businesses should also continue to notify HMRC about vehicles brought into the UK from abroad as they do now. The Notification of Vehicle Arrival Procedures (NOVA) system will continue to be used for this purpose. The rules on the movement of goods to the UK from the EU will change meaning that import VAT will eb due on vehicles brought into the UK from the EU.
A no deal Brexit will mean that UK businesses will be able to zero rate sales of goods to EU consumers. VAT registered UK businesses will continue to be able to zero-rate sales of goods to EU businesses but will not be required to complete EC sales lists.
As UK VAT registered businesses will not be required to complete an EC sales list, there will be changes to how these sales are recorded. Those UK businesses exporting goods to EU businesses will need to retain evidence to prove that goods have left the UK, to support the zero-rating of the supply. Most businesses already maintain this evidence as part of current processes and the required evidence will be similar to that currently required for exports to non-EU countries.
Current EU rules would mean that EU member states will treat goods entering the EU from the UK in the same way as goods entering from other non-EU countries with associated import VAT and customs duties due when the goods arrive. Individual EU member states may have different rules for import VAT for non-EU countries and import VAT payments may be due at the border when importing goods.
Place of supply rules
The main VAT place of supply rules will remain the same for UK businesses. The current rules determine the country in which you need to charge and account for VAT. These rules are in line with international standards set out by the OECD.
The rules around place of supply will continue to apply in broadly the same way that they do now. For UK businesses supplying digital services to non-business customers in the EU the place of supply will continue to be where the customer resides. VAT on services will be due in the EU member state within which the customer is a resident.
For UK businesses supplying insurance and financial services, if the UK leaves the EU without an agreement, input VAT deduction rules for financial services supplied to the EU may be changed.
UK VAT Mini One Stop Shop (MOSS)
Businesses will no longer be able to use the UK’s MOSS portal to report and pay VAT on sales of digital services to consumers in the EU.
Businesses that want to continue to use the MOSS system will need to register for the VAT MOSS non-Union scheme in an EU member state. This can only be done after the date the UK leaves the EU. The non-union MOSS scheme requires businesses to register by the 10th day of the month following a sale. Businesses will need to register by 10 April 2019 if they make a sale from the 29 to 31 March 2019, and by 10 May 2019 if they make a sale in April 2019.
ACCA has welcomed the VAT guidance issued by HMRC. ‘While the government’s aim is to keep VAT procedures as close as possible to what they are now, there’s a strong possibility that things will change and that more guidance is to come - for instance with the land border between Ireland and Northern Ireland. This is still hazy, and we look forward to the government’s “more information in due course,’ says Chas Roy-Chowdhury, global head of tax at ACCA. ‘The VAT guidance explains that if a no deal happens, the remaining EU member states will become third countries. This means businesses’ IT systems will need to be changed in order to re-categorise them.’
‘It’s important for businesses to note that they are currently able to obtain VAT refunds from other member states through a straightforward single market mechanism. This will stop and some member states may stop refunding VAT at all to the UK as they currently do to the US.’
VAT for businesses if there’s no Brexit deal is available here
Report by Amy Austin