The implications of the UK’s new relationship with the EU on VAT depends on whether you supply goods or services and how your business is set up.
Movement of goods from the UK to the EU is now deemed an export.
For the majority of cases, these exports will be zero-rated. For services, place of supply still applies, but there are some exceptions, such as the delivery of digital services.
The UK is no longer part of the EU VAT area.
This means that each member state collects import VAT when selling from Great Britain to customers based in the EU. Depending on your business model and Incoterms used, you may need to register for VAT in the different member states that you operate in.
In addition, as the UK is no longer in the EU VAT area distance selling thresholds no longer apply to businesses only registered in the UK. This can mean that businesses may need to consider registering for VAT in different member states for even for low levels of sales.
Changes to submission of EC Sales Lists
iAn European Community Sales List is used by a VAT-registered business to tell HMRC about supplies to an EU country, detailing your EU customers, the sterling value of the supplies and the customers’ country code.
If you’re exporting goods from Great Britain to EU businesses or supplying services from Great Britain and Northern Ireland, you won’t need to submit EC Sales Lists. However, this still applies if you’re selling goods from Northern Ireland to EU VAT-registered customers.
You can’t use the VAT Mini One Stop Shop (MOSS) in the same way.
Further changes to EU VAT MOSS are coming.
The EU is introducing new rules for VAT for B2C e-commerce sales to consumers from third countries, which now includes UK businesses, from 1 July 2021, called the Import One Stop Shop (IOSS).
Small firms exporting to the EU under the new IOSS will be able to register for this scheme in one EU member state, and then have IOSS handle VAT for any other member states to which they export. This will mean that VAT will collected and charged at point of sale online, and then paid via the IOSS.
You need an EORI number.
You should apply for an EORI number that starts with GB if you’re exporting goods outside of the UK.
EU VAT applies to all digital services supplied to EU consumers.
When you’re providing cross-border digital services to consumers, you should check their location and if they’re a business or private consumer. Read our guide to the services sector to find out more about how in-person and digital services are affected by the new rules.
You may need to appoint a fiscal VAT representative or agent.
If you need to register for VAT in a member state that requires it, a fiscal VAT representative would represent you when dealing with member states’ tax authorities.
In the agreement, there are provisions on mutual assistance with VAT, which removes the requirement to recruit or appoint a fiscal representative in certain member states, but this is not true for all jurisdictions.
You should talk to your accountant in the first instance and look at the Government guidance to see if there are any markets in the EU where you will have to have to register a fiscal representative. Requirements differ by member state so you should check if you need one.
HMRC’S rules on duty deferment accounts have changed for imports.
This means that if you are an importer, you can pay your VAT on a monthly direct debit basis rather than per consignment. Previously, this required a financial guarantee, but from 1 January 2021 a new guarantee waiver has been introduced. Find out more here.
The Northern Ireland Protocol means that some EU VAT administrative processes regarding goods moving to, from, and within Northern Ireland still apply. However, Northern Ireland is still part of the UK’s VAT system and will remain aligned with the rest of the UK in relation to services.
The Government has detailed guidance on when you need to account for VAT on your tax return if you’re a VAT registered business trading under the Northern Ireland Protocol.