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As we inch ever closer to 31st October, the date tabled for Britain to leave the EU, and with the proposed deal yet to be approved by government, a range of proposals have been drafted which will come into play in the event of a no-deal Brexit. While there does not appear to be much appetite for a no deal Brexit, as it currently stands a deal has not yet been ratified, and with Boris Johnson adamant that the UK will be leaving the EU at the end of October come what may and the EU refused to grant another extension, the possibility of a no deal outcome cannot yet be discounted.

VAT and no deal

When it comes to VAT and how this is calculated and charged, a no deal Brexit would mean changes would have to be made to how transactions between the UK and EU member states were treated. It is important to note that should the UK leave the EU without a deal there will be no transition period; instead the UK will immediately become a ‘third country’ for the purposes of EU VAT. The situation stands to be even more complex for businesses in Northern Ireland; in fact Johnson’s tabled deal has caused much concern over how Northern Ireland will be treated when it comes to VAT and customs checks.

For the majority of mainland UK businesses will experience no difference when it comes to how they charge and process vat and these proposed changes relate to transactions undertaken with EU customers only.

However, for those businesses which do trade with parties based in the EU, it would be prudent of them to prepare for the potential of a no deal Brexit and understand how their VAT position may change in this instance. This includes companies who import or export goods to and from the EU, supply services to the EU, or utilise EU VAT systems including the VAT Mini One Stop Shop (MOSS).

"When it comes to VAT and how this is calculated and charged, a no deal Brexit would mean changes would have to be made to how transactions between the UK and EU member states were treated."

Here are the main proposed changes to VAT should the UK leave the EU without a deal on 31st October:

  • Goods which are imported to the UK from the EU will be treated the same as goods which are currently imported from non-EU countries. There will also be a change to the timing of payment of Import VAT which will not be paid at the time of import, but rather be included on the relevant VAT return. Any business which feels it may be affected by this may wish to apply for what is known as an EORI number now which may help to simplify Customs procedures.
  • All parcels entering the UK will be subject to VAT. For goods valued under £135, it will be the seller’s responsibility to register, charge, and report UK VAT via a new digital service.
  • Goods exported to EU retail customers will be zero rated, however, import duty and VAT will be due in the destination country.
  • Goods exported to EU businesses will also remain zero rated, with any import duty or VAT the responsibility of the importing party.
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