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Brexit VAT changes for UK business: what’s next?

As the UK counts down to our EU departure on 31 January, post Brexit VAT has become a huge issue for business.  

This quick guide covers our VAT arrangements with the EU now, what is likely to happen, and the steps businesses should be taking now.

Brexit VAT

VAT rules before January 31

Businesses trading with anyone who is VAT-registered in the EU do not pay VAT until a product is sold to a customer and it is paid for.

As long as you have their VAT registration number and two-letter country code on your sales invoice, you have evidence that goods have gone out of the UK and you evidence of removal within three months, you can expect to benefit from existing UK EU VAT policy.

Note: you must keep this evidence for six years, according to HMRC. You can verify the validity of a VAT number issued by any Member State on the European Commission website.

Brexit VAT changes

Import and export requirements between the UK and the EU will change, deal or no deal. At this stage, there is an assumption that business may need to pay for VAT upfront. Under our current arrangement, VAT normally must be paid before goods are released by customs.

If we leave the customs union, EU goods will be treated like other imports after Brexit, unless agreements are reached during trade talks. Under such rules,

Under the terms of the Withdrawal Agreement, which was passed through parliament in January 2020, Northern Ireland will stay inside the UK customs territory and VAT area but will align with EU rules.

In December 2019, the government promised to introduce a triple lock to freeze income tax, National Insurance and VAT for the next five years. This was positive news to many businesses who have spent some time deciphering what will happen to VAT post-Brexit. Historically, stealth taxes have been introduced to bridge the tax gap, which we will be watching for.

VAT refunds from EU member states

After 31 January, businesses will no longer be able to use HMRC’s VAT online services to claim a VAT refund from an EU member state. Previous claims can still be viewed, according to the most recent advice.

As a result, processing VAT reclaims between the UK and EU will become significantly more time consuming.

After Brexit, businesses must adhere to VAT refund processes set out by individual member states. The European Commission sets out individual EU VAT refunds.

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Next steps for business

The EU is ready to negotiate a far-reaching and comprehensive trade deal. During this initial stage, the EU has stated that without free movement, the movement of capital, goods and services will also need to change.

We cannot ignore the fact that nothing is set in stone at this stage. However, we advise that businesses should remain focused on their existing strategies and continue to trade as normal.  

We advise that businesses partner with an established accountancy firm to navigate the changes ahead.

Cardens Accountants understand that complying with VAT is becoming more complex, even in regular circumstances. Get in touch with our friendly team to take advantage of available reliefs and VAT planning expertise.


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