On 23 August 2018, the government published a note for businesses and individuals addressing the impact on VAT in the event of a no-deal Brexit. Although the government aims to retain existing VAT rules and procedures as much as possible, there will be some inevitable changes.

Importing goods from the EU

Generally, the current rules governing imports from non-EU countries will apply to imports from the EU, but there will be some changes.

Postponed accounting for import VAT on goods brought into the UK from any country will be introduced. As such, VAT will be accounted for in importers’ VAT returns, rather than being paid at the time of import.

Low value consignment relief will not be extended to parcels from the EU. Any parcels sent to the UK valued at £135 or less will attract a VAT charge at the time of purchase and will be required to be paid to HMRC. A digital service will enable overseas businesses to register with HMRC. VAT will continue to be collected from UK recipients for all other excise goods, higher value parcels and potential non-compliance overseas suppliers.

Unless relief is available, vehicles from the EU will be subject to import VAT. The existing Notification of Vehicle Arrival Procedures system should continue to be used to notify transactions to HMRC. 

Exporting goods to the EU

The position is not yet confirmed, however, UK businesses are being warned that they will need to check with the relevant member state which rules and process will apply to the goods they export to the EU.

Distance selling arrangements will not apply to UK businesses. Sales of goods to EU consumers will be zero-rated and import VAT will be due at the point of import.

Businesses which are VAT registered will continue to sell goods to EU businesses at zero-rate, but businesses will be required to retain evidence to show goods have left the UK, rather than submit EC sales lists.

When selling goods stored within a member state to EU customers, UK businesses will be required to register and account for VAT in the member states where the sales are made.

Supplying services to the EU

For services supplied to EU member states, the place of supply rules will broadly remain the same. VAT will be due in the member state where the customer resides. However, it is likely that there will be changes to the input VAT deduction rules for financial services and further guidance is awaited.

The online mini one stop shop scheme (MOSS), which allows businesses selling digital services to EU consumers to report and pay VAT through a single return, will no longer be available. However, businesses will be able to register for the MOSS non-union scheme in an EU member state after the UK has left the EU.

A copy of the technical note can be viewed here