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Brexit and VAT: where are we now?

Brexit and VAT: where are we now?

Now that the UK has left the EU, we have summarised the key changes for businesses in respect of VAT on services and goods. We have been, and will continue to be, working with our clients to assess how the changes may impact their ‘Big Picture’ and consequently any potential actions they need to take.

Brexit implications for VAT on services

Supply of services covered by the basic rules to non-UK customers

These services follow the existing rules, so most services should be outside the scope of UK VAT for business-to-business services.

Business-to-consumer sales are only outside the scope if they are of a specific intellectual nature (consultancy, accountancy, advertising, etc.).

The business customer continues to account for local reverse charge.

Action point

If using an EU supplier for provision of services to you, then check their local VAT rules to see if ‘use and enjoyment’ means that local VAT will be charged to you. Otherwise, EU costs will remain liable to the reverse charge as normal.

Land-related services

Current rules apply. The supplier is likely to have to be VAT-registered in the EU country where the land belongs.

Admissions to events

Current rules apply. The supplier of the event is likely to have to be VAT-registered in the EU country where the event is held.

Tour Operators Margin Scheme (TOMS)

Will cease to apply to EU trips/activities, but will remain in place for UK-based activities.

Action point

Local EU VAT registrations may be required in the EU country where enjoyment takes place. You will need to check with the local EU Member State.

Business-to-consumer digital sales of services

MOSS (Mini One-Stop Shop) is no longer applicable. VAT is still due in the consumer’s EU Country, so the supplier will have to register in an EU Country of their choosing and account for EU VAT through the Non-Union MOSS scheme.

Action point

No thresholds apply. If you had sales in January 2021, you needed to register by 10 February to account for VAT. Otherwise, you should register by the 10th day of the following month in which the first business-to-consumer sale is made.

Insurance and financial services

All ‘specified’ services to EU customers are ‘exempt with the right of recovery’, and so recovery of input VAT is possible, rather than being exempt income.

Action point

You will need to review partial exemption methods to ensure that the new rules are catered for. However, there will be better VAT recovery on costs for financial and insurance suppliers.

EC Sales Lists for GB suppliers

These are no longer required!

Action point

However, Northern Ireland businesses must still complete them!

Brexit implications for VAT on goods

Call off stock, consignment stock, supply and install, and triangulation simplifications

All easements have disappeared for GB businesses. Suppliers in Northern Ireland will still benefit and will be given an ‘XI’ VAT prefix to existing VAT numbers.

Action point

All GB businesses will need to VAT register in an EU Member State where:

  • They retain stocks there; or

  • They buy goods in that country for sale in that country or for shipment to another EU country; or

  • They supply materials for installation in that country (supply and install).

Goods exported from GB into the EU

These will need to be imported into the EU Member State.

Action point

  • Ensure that all contracts clarify who is the importer of those goods (ideally the customer).

  • The importer will need to pay import VAT when the goods enter the EU and pay excise duty appropriate to those goods.

  • If the goods are of EU or UK origin, then no customs duty is payable by the customer/importer for movements of goods into the EU or into GB.

  • Goods will need to be ‘cleared’ into free circulation within the EU, so a shipping agent or appropriate person will need to complete all appropriate paperwork.

  • Import/export licences may be required for some goods.

Goods sold for delivery to any destination outside the UK

These are now zero-rated sales.

Action point

There is no longer any need to retain evidence of the EU VAT number of business customers

EC Sales Lists

These are no longer required for GB businesses! However, as with services, they will still need to be completed for the sales of goods from Northern Ireland to the EU.

Action point

Ensure that accounts packages that automatically complete these are amended – VAT codes in software will need to
be changed.

Intrastat Returns

These are required for Arrivals of goods into GB until the end of 2021. Northern Ireland businesses need to declare Intrastats for both Arrivals & Dispatches until 2025.

Action point

Not needed for Dispatches for GB sellers. Northern Ireland businesses need to continue to submit both declarations.

Margin Scheme for Art, collectors’ items and second-hand goods

When goods are sold (and shipped out of the UK) to an EU buyer, then the sale is an export and not a margin scheme sale. The margin scheme is expected to be amended to allow use of scheme for imported second-hand goods (as it is currently for works of art), but confirmation of this is still awaited. Until this is confirmed, then the margin scheme cannot be used for imported second-hand goods.

Action point

  • Goods sold under the scheme would have to be imported into the EU;

  • Buyer has to declare import VAT, and therefore the purchase becomes more expensive.

  • Margin scheme accounting systems will need to be amended.

  • Temporary movements to art fairs will need to ensure import VAT is suspended and appropriate licenses obtained.

  • Artworks, antiques and collectors’ items can be sold under the margin scheme as pre-2020.

  • Second-hand goods imported into GB cannot be sold under the margin scheme, so normal rules apply and full VAT is applicable to UK sales.

Goods shipped from EU into GB

These are now ‘imports’, not ‘acquisitions’.

Action point

  • Account for import VAT through your UK VAT return (in Box 1 of VAT return) and reclaim import VAT (subject to normal rules on recovery) in Box 4 of same VAT return;

  • Shipping agent or import agent needed to clear the goods into UK;

  • Importer’s EORI number must be declared on customs documents;

  • Payment of customs duties on goods of non-EU or UK origin. Origin must be declared (and if necessary evidenced)
    at import;

  • Possible licences required depending upon the type of goods.

Postal Goods under £135

If the UK customer is VAT-registered and provides Online Marketplace (OMP) or overseas seller with a valid GB VAT number, then it accounts for the import VAT.

Action point

  • Customer accounts for import VAT in Box 1 of VAT return and reclaims in Box 4 of same return;

  • Likely that this will only work if customer’s EORI number is on the parcel and customs declaration!

If the UK Customer is not VAT-registered, the rules are different:

Action point

Then, the supplier or OMP is required to VAT-register in UK through a new digital online service, and then to declare UK VAT on sale value. Import VAT is not paid separately.

EU VAT Refunds

The online system of refunds is no longer applicable.

Action point

You will have to make a paper application to the EU Member State as a ‘3rd country reclaim/13th VAT Directive claim’. These cover a different reporting period (July to June) and must be made in the local language of the country.

The above summary of changes is not exhaustive, so please do get in touch with us if you need further information and guidance.

You can contact us on 01892 546 546 or at

Please note: The information above is based on our understanding and interpretation of the government’s guidance as of 5pm on Wednesday 24 February 2021. Changes to government guidance on a daily basis may mean that this information is not accurate or complete beyond this time.