How Brexit is affecting treatment of VAT on your sales
We have now moved to post Brexit phase it is worth mentioning that there are changes to VAT treatment of sales that need applying to all sales from 1 January 2021. All information valid only at the time of publishing.
Distance selling – goods (from EU to UK)
From 1 January 2021 such sales to UK consumers/businesses become imports to the UK on which import VAT is due. The goods will enter free circulation in the UK when the goods have been declared to customs and any import VAT, customs duty and other import taxes (as applicable) have been paid. Importers must ensure that their goods are properly declared in order that they receive the correct evidence to enable them to recover, if they are so-entitled, the import VAT.
Goods entering Northern Ireland from the EU, although technically imports, will be subject to VAT as though they were intra-EU acquisitions. There will be new rules concerning the movement of goods between Great Britain and Northern Ireland.
Distance selling – goods exports
From 1 January 2021 the term ‘exports’ refers to goods shipped from Great Britain to non-UK destinations and from Northern Ireland to non-EU destinations.
The place of supply of exported goods is the UK, but exports are zero-rated, provided the relevant conditions are met. Please note if you are below VAT threshold exported goods contribute to the VAT registration threshold.
The EU Commission is intending to introduce an Import One Stop Shop on 1 July 2021, this will be a simplified way for overseas suppliers to account for import VAT due in all EU member states on one return. Until this new system is up and running, import VAT is due in each member state to which goods are shipped.
The legislation concerning registration in the UK by EU distance sellers will be repealed from 1 January 2021.
Distance selling – services sold outside UK
For services, the VAT liability can change depending on what is supplied, where the customer is located and what type of customer is supplied (a business or a final consumer). If supplies are deemed to occur in the UK then VAT is charged, in all other cases VAT is
•For a B2B (business to business) supply, in general the place of supply is where the customer belongs.
•If the supply is a B2C (business to final customer), the place of supply is where the supplier belongs. There are exceptions to this general rule, please ask us for details.
If supplies are made by UK supplier to an overseas business customer and the place of supply is where the customer is established, the supply is outside the scope of UK VAT. The supplier is not required to charge UK VAT on their invoice. If the customer is in a country which operates a VAT system, the customer must normally self account for the local VAT due via the reverse charge (this is the case in all EU member states).