Last week HMRC announced their plans for VAT if the UK ends up leaving the EU in March 2019 without a deal. They have emphasised that the government is confident a deal will be reached, but they are introducing contingency plans as a precautionary measure.
The premise of the update is that VAT will be largely unaffected by the UK leaving the EU without a deal; with the aim of keeping the VAT procedures as close as possible to the current procedures. To summarise the key points of the release, if there is no agreement with the EU:
- VAT rules relating to UK transactions will remain the same.
- Postponed accounting will be introduced for import goods (EU & non-EU). This means that all VAT will be accounted for on a business’ VAT return rather than at the port on entry (as with non-EU imports currently).
- Low Value Consignment Relief (no import VAT for goods entering UK from non-EU at <£15) will be abolished, and not extended to EU supplies. Instead, goods supplied at <£135 will have VAT charged at the point of purchase (a technology – based solution will allow overseas businesses to register with HMRC to ensure that VAT does not become burdensome for UK customers). For goods >£135 VAT will continue to be collected by the recipient in the same way as it currently is (details can be found here https://www.gov.uk/government/publications/notice-143-a-guide-for-international-post-users/notice-143-a-guide-for-international-post-users#postal-packages-imported-arriving-from-countries-outside-the-eu)
- Import VAT will be due on vehicles brought in to the UK from anywhere in the world, and you should continue to notify HMRC about vehicles bought in to the UK in the same way as you do now (NOVA).
- Distance selling arrangements will no longer apply, and therefore UK businesses selling goods to EU consumers will be able to zero rate their sales as exports.
- No need to complete an EC sales list.
- Evidence will need to be retained to support zero rating of goods to EU businesses (same evidence as required to export to non-EU currently).
- Place of supply rules will remain broadly the same; if supplying insurance / financial services to the EU, the rules for deducting input tax may be amended (to be confirmed). Also, if you are a UK business using the VAT Mini One Stop Shop (MOSS) you will need to consider registering for the MOSS non-union scheme or registering for VAT in the EU member states in which sales are made.
- VAT number validation – UK businesses will be able to continue to use the EU VAT number validation service to check EU registrations, but UK VAT registrations will no longer be included. HMRC are developing a service so that UK VAT numbers can still be validated.
If you do have any questions relating to the above, or concerns about the VAT implications of leaving the EU, please feel free to contact us for advice.