If the UK leaves the EU without a deal at end of October there will be changes to the VAT regime that take effect on 1 November 2019. However, these changes affect mainly affect businesses that trade with the EU.
Imports and Exports of goods from and to the EU
If you are either importing or exporting goods you must have an EORI number. You can apply for this from HMRC if you have not already received one. HMRC have been issuing EORI numbers automatically so check whether you have already got one.
Goods imported from the EU will be subject to import VAT and possibly import duties, depending on any interim arrangements made with the EU. Excise duty will be due on excise goods unless in a duty suspension regime.
In a move to ease the possible cashflow disadvantages of paying VAT at the time of import, the government will introduce postponed accounting to import VAT on all imports. This means import VAT will not have to be paid when the goods enter the UK but will be accounted for through the VAT returns, in a similar way to how VAT is currently accounted for on goods arriving from the EU (using Box 2 of the VAT return). Duties will be payable on entry or under the duty deferral scheme.
A possibly more difficult change will be the need to make import declarations in respect of goods imported form the EU. If you already import goods from outside the EU you may already be familiar with import procedures but if you have imported goods only from the EU you will need to plan how you will deal with import declarations. If you intend to deal with import declarations yourself you may find the Transitional Simplified Procedures (TSP) useful. You need to register separately to use TSP in addition to the registration for Customs Handling – note that HMRC are moving to a new Customs Declaration Service (CDS).
You must also find out whether any goods you import will require an import licence.
There are bound to be delays while new import processes are bedded in and this should be built into delivery and processing schedules.
Goods exported to the EU will be zero rated as long as all the conditions for zero rating are met. There will no longer be a need to obtain or quote the customer’s VAT number. There will no longer be a requirement for EU Sales Lists.
However, export declarations will be required for goods exported to the EU – you can either deal with the declarations yourself via the Customs Handling or CDS service, or appoint a customs agent. Subject to any interim arrangements made by the EU, certificates may also be required to show that goods meet relevant EU standards and certificates of origin may also be required. You need to know if any of these non-VAT requirements apply to your goods.
Goods may be subject to duty and checks on reaching the EU border and so these should be taken into account in your pricing and timing of deliveries to EU customers.
If you currently use the distance selling rules to account for sales to EU customers as UK sales, this will end, in a no-deal Brexit, on 31 October 2019. From 1 November 2019 these will be exports and so zero rated. However, packages will need to conform with the import requirements of the countries they are sent to in order to prevent delays and possible rejection at the EU border. VAT and duty may be payable by the customer, alternatively the supplier may be required to register in the EU countries where their customers are.
After 31 October 2019 some services that are standard rated if supplied to non-business customers in EU countries will be outside the scope of VAT.
The VAT status of some “specified services” (mostly finance and insurance services) currently supplied to customers in the EU will be altered so that they continue to be exempt.
After 31 October the current MOSS scheme will not be available to UK businesses. Suppliers of digital services to non-business customers in EU countries will have to register in those countries or will have to register to use the “non-union” MOSS scheme in one of the remaining EU states.
EU Refund Scheme
The online refund scheme for VAT incurred in other EU countries will not be available after 31 October 2019.
Claims may be made under the 13th Directive but this depends on the individual tax arrangements between the UK and the other country. Claims will have to be made to the tax authorities of the country concerned in accordance with their particular rules.
Also keep a look out for announcements from HMRC or the government regarding trade with the EU.