In a VAT Committee working paper, the European Commission indicates that the 28 Member States of the European Union (EU), "almost unanimously” agreed to a number of interim measures regarding the application of VAT that should apply in the event of the withdrawal of the United Kingdom from the EU without an agreement.

According to our knowledge, UK is one of the EU Member States that agrees with the guidelines suggested by the European Commission.

VAT Committee guidelines do not provide direct effects on the legislation of the EU Member States. Provided that the national Tax authorities of each jurisdiction confirm they agree with those guidelines, four topics would be concerned.

Treatment of ongoing movements of goods at the moment of UK’s withdrawal

With regard to ongoing movements of goods, the applicable VAT regime would be the one governing imports if the goods in question enter into one of the EU Member States as from the withdrawal date. In such a case, no intra-Community acquisition of goods would need to be declared, even if the taxable event (i.e. the transfer of the right to dispose of a good as an owner) took place before this date.

Reimportation of goods after the date Brexit takes effect

As from the date Brexit takes effect, the re-importing into an EU Member State of a good that was dispatched or transported to the United Kingdom before this date could benefit from the exemption provided in Article 143, paragraph 1(e) of the VAT Directive. . This exemption would only apply to goods reimported at most three years after they were initially transferred to the United Kingdom and if they are in the same state as when they were initially dispatched. This three-year period is the period set out in Article 203 of the Union Customs Code (UCC), which provides for an exemption under certain conditions from customs duties applicable to the regime governing returned merchandise.

The taxable person must provide evidence of compliance with these terms by any means available.

Personal property imported by individuals when changing their principal residence after the withdrawal

If an individual in the United Kingdom changes his or her residence to one of the EU Member State within six months of the date Brexit takes effect, the importation of his or her personal property would benefit from the exemption provided in Article 4 of Directive 2009/132/EC. This exemption would apply as long as the individual in question was in possession of these goods and used them for at least six months before the date of change in residence. Furthermore, the exemption measure would be subject to proof that the duties and taxes (import or domestic, for example) applicable to these goods in the customs territory of the United Kingdom or of one of the 27 Member States have been paid before they are imported.

Applications for refunds of VAT charged before the date Brexit takes effect

As from the date Brexit takes effect, the electronic procedure for VAT refunds provided in Directive 2008/9/EC for undertakings established in a Member State of the EU but not identified for VAT purposes in the State of refund will no longer apply, and the exchange of information between the United Kingdom and the Member States of the EU will no longer be possible via the electronic system in place between the Member States of the EU for this refund procedure.

For applications submitted by the taxable person and sent by the Member State of establishment to the one of refund before the date Brexit takes effect, the procedure and, in particular, potential requests for additional information will be managed directly by the Member State of refund and the taxable person.

As from the date Brexit takes effect, applications that have not yet been sent to the State of refund in accordance with the electronic procedure must be presented by the taxable person in question directly to the State of refund.

The other terms and conditions governing refunds set out in Directive 2008/9/EC for undertakings established in the EU still apply to all these applications when they relate to VAT charged before the effective date of Brexit.

The British tax authorities have also indicated the rules (for more information click here) that will apply to refund applications submitted by European undertakings for VAT charged as of the date Brexit takes effect. The procedure will be the one that has applied to date in the United Kingdom to undertakings established outside of the EU based on the 13th VAT directive.