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UK VAT after leaving the EU
   

Please note: the information on this page is for guidance only and should not be taken as definitive VAT advice, since individual circumstances may vary. For details of your obligations for sales and purchases abroad, please refer to HMRC guidance.

Introduction

The UK has left the EU and the transition period ends on 31 December 2020. This will impact the processes for accounting for VAT on EU sales and purchases in VT Transaction+.

Below is a summary of some of the key changes from 1 January 2021 for UK VAT registered businesses.

Please also note the differences between businesses in Northern Ireland (NI) and Great Britain (GB) i.e. the United Kingdom excluding NI.

Purchases of goods from EU suppliers (by GB businesses only)

These will be classed as 'imports', as is currently the case for purchases of goods from the rest of the world.

Imports incur UK VAT. Up to 31 December 2020, import VAT on goods from outside the EU entering into the UK must be paid at the point of entry into the UK (although certain businesses can defer payment by arrangement with HMRC).

From 1 January 2021, payment of import VAT can be postponed for all imports entering into the UK (not only from the EU but also the rest of the world). This is known as Postponed VAT Accounting (PVA), which allows you to account and pay for import VAT on your VAT return. This will be available to most businesses.

This will operate by means of a monthly online statement of postponed VAT from HMRC.

For guidance on accounting for PVA on VT Transaction+ please click here.

You may also have to pay customs duty on imports, however this is separate to import VAT. Please refer to HMRC guidance for details.

Purchases of goods from EU suppliers (by NI businesses only)

Under the Northern Ireland protocol, Northern Ireland will be part of the UK VAT system whilst also maintaining alignment with EU VAT rules for movement of goods* (not services).

Purchases of goods from the EU will follow the same VAT treatment as existing rules for purchases of goods between EU member states (referred to as 'acquisitions')

This means that 'acqusitions tax' needs to be accounted for on purchases of goods from the EU. Please click here for guidance.

*Movement of goods between GB and NI may differ, see 'Movement of goods between GB and NI' below

Sales of goods to EU customers (by GB businesses only)

This type of sale will be classed as an 'export' for UK VAT purposes, as is already the case for sales of goods to the rest of the world.

Exports of goods are also generally zero-rated for UK VAT, subject to certain conditions.

For guidance on accounting for VAT on exports in VT Transaction+ please click here.

Sales of goods to EU customers (by NI businesses only)

Under the Northern Ireland protocol, referred to above, sales of goods to the EU will follow the same VAT treatment as existing EU rules for sales of goods between EU member states (referred to as 'dispatches')

This means that the sales of goods to VAT registered EU customers are normally zero-rated for VAT, and sales of goods to non-VAT registered EU customers normally incur VAT. Please click here for guidance.

EC Sales Lists

EC Sales Lists will no longer be applicable for businesses trading from Great Britain. However, if you are a Northern Ireland business selling goods to VAT registered EU businesses, you still need to complete it.

Further details on EC Sales Lists can be found here.

Movement of goods between GB and NI

Under the Northern Ireland protocol, referred to above, EU VAT rules for NI mean that goods moving between GB and NI will be classed as exports and imports for VAT purposes. However, HMRC intend to deviate from this and treat transactions between GB and NI as domestic transactions within the UK for VAT.

You should refer to HMRC guidance to confirm whether your transaction should be accounted for as a domestic transaction or an import/export.

This will determine the appropriate way to account for VAT on VT Transction+. 

Please click here for more information.

Reverse charge VAT on purchases of services from abroad

The principle should not change, in that if a service from an overseas supplier (be they from the EU or the rest of the world) is deemed to take place in the UK under HMRC place of supply rules, it is subject to UK VAT, charged through the reverse charge mechanism.

For guidance on reverse charge VAT on services from abroad please click here