Brexit: Implications for VAT

Zoho Books | July 17, 2019 | 3 min read

The European Union and the UK government have agreed to keep the UK a part of the European Union for the time being. But there is still a lot of uncertainty about how the UK is going to handle its VAT processes once the UK leaves the EU. 

Currently, the UK’s VAT procedure is in compliance with the EU VAT code. However, with the UK expected to leave the EU, the VAT procedure is subject to change.

When Parliament approves a withdrawal plan and the UK leaves the EU, your business should be ready to handle your taxes in this transitional period in case of a no-deal Brexit.

Accounting for Import VAT

Import VAT is the tax paid on goods purchased from other countries.

Under the current scenario, UK businesses account for their imported goods when, or right after, the goods arrive at the UK border.

In the event of a ‘no-deal Brexit’, the government will introduce postponed accounting for import VAT on goods brought into the UK. This will allow VAT-registered UK businesses to bring goods into the UK from both the EU and non-EU countries. The businesses can account for any import VAT due on their VAT return, rather than paying it at the time the goods enter the country.

Business-to-Business Supplies of Services

Presently, UK businesses selling telecom, broadcasting, and digital services (e.g., software applications, streaming services, or e-materials) to EU consumers have the option of accessing the UK’s MOSS (Mini One Stop Shop) portal to account for VAT on these digital sales. 

MOSS is an online portal that allows EU businesses that sell digital services to consumers in other EU member states to report their VAT without having to register in each EU country. Businesses that are not part of the EU can also access the portal by registering in an EU member state. 

If the UK leaves the EU without an agreement, businesses will no longer be able to use the UK’s MOSS portal to report and pay VAT on sales of digital services to consumers in the EU.

Businesses that want to continue to use the MOSS system will need to register for the VAT MOSS non-union scheme in an EU member state. This can only be done after the date the UK leaves the EU. 

EU VAT Refund Claims

Under the current VAT laws, UK businesses submit their claims through the EU VAT refund online portal. Businesses that have registered in any of the EU member countries can claim VAT refunds even if they were incurred in another member state.

In case of a no-deal Brexit, the HMRC will close the UK portal for new claims after the UK leaves the EU. After that, UK businesses claiming VAT in an EU country must apply to that particular EU member state directly.

Current VAT Rules vs. Changes to VAT after a No-Deal Brexit 

Key Takeaways

  • Domestic VAT within the UK is unlikely to change following Brexit. There should be nothing in the Brexit decisions that requires changes for purely domestic businesses, and VAT rates are also unlikely to change.
  • In the event of a no-deal Brexit, the government will introduce postponed accounting for import VAT on goods brought into the UK.
  • Use of the UK Mini One Stop Shop (MOSS) portal for digital services will cease and businesses wishing to continue using MOSS will need to register in the relevant EU member state.
  • These VAT implications are subject to change until the UK and the EU come to a final agreement. In the meantime, it’s vital for business owners to be prepared and keep an eye out for the latest news about VAT.

    When tax laws change, it can get quite tricky to file your returns, You can ease the burden of filing VAT returns with Zoho Books, which is equipped for VAT compliance. Zoho Books can help you to calculate the tax you owe, create VAT reports, and track the VAT you’ve paid and reclaimed with HMRC.

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    1. Tori

      Good afternoon! Great extensive article. I just needed information on VAT in Europe. UK as an option. Thank!

    2. shrishti patni

      Hello,
      I have been searching for this content as i was eager to know about it.Thank you for your blog because it helped me in many ways come across different context of the content.The VAT implications and the agreement was well explained.

      • Bennet Noel

        Hey Shristi,
        We’re glad that you’ve found the blog to be of help. Thanks for reading!