VAT and Brexit
It is looking increasingly likely that the UK will leave the EU (Brexit) without a withdrawal deal in place at 11pm on 29 March 2019. In that situation the VAT arrangements that EU member countries benefit from will immediately fall away for UK businesses. This will significantly affect businesses that import and export goods, but other businesses will also be affected by these changes.
The UK will still continue to have a VAT system after it leaves the UK and the vat rules will continue to apply to businesses as they do now.
It is the governments intention to keep VAT procedures as closely aligned as possible to what they are currently however there will some specific changes to Vat rules and procedures that apply to transactions between the UK and EU.
Claiming EU VAT refunds
Where a business has incurred VAT on business expenses in another EU country during 2018, it would normally have until 30 September 2019 to reclaim that VAT. HMRC is urging businesses to submit those claims before 29 March 2019, as claims after that date will have to be submitted to the individual countries concerned, rather than through the HMRC portal.
If any businesses are still registered for VAT MOSS, as the de-minimis threshold of £8188 kicked-in from 1 January 2019, they will have their VAT MOSS registration cancelled automatically from 1 April 2019.
Where the business continues to make sales of digital services to non-business customers in EU countries after 29 March 2019, it will have to re-register for VAT MOSS as a non-EU business in an EU country, (ie not the UK) by 10 April 2019.
The de-minimis turnover threshold for VAT MOSS does not apply for non-EU businesses, so many of the UK businesses which dropped out of VAT MOSS from 1 January 2019 will be pulled back into that regime.
Check VAT number
Currently there is a VAT number checking service to check the validity of EU VAT registration numbers. From 30 March 2019 that service won’t cover UK VAT numbers, but businesses will be able to check UK-only VAT registration numbers on GOV.UK. In addition, UK businesses will continue to be able to use the EU VAT number validation service to check the validity of any other EU VAT registration
Further details on vat changes in the event of UK exiting without a deal can be found on the government website here
The government has also produced technical guidance for VAT in the case of a ‘no deal’ brexit which can be found here
See our ‘No Deal’ planning page for a checklist and further resources.