How will a hard Brexit affect VAT for UK import and export businesses?
13/03/19
With the UK’s scheduled exit from the EU on 29 March a matter of days away, we still have little certainty about the form of the exit or the effect it will have on businesses. The government has, however, issued some guidance for businesses should the UK crash out of the EU with no deal in place. So, what should businesses that import or export goods or services into or out of the UK expect should a no-deal Brexit take place?
The government’s stated aim is to minimise any changes. The expectation is that the procedures for imports and exports between the UK and the EU in the event of no deal will be similar to those between the UK and non-EU countries. This is likely to mean:
Importing goods into the UK from the EU
- Additional paperwork, with customs declarations to submit for goods entering the UK from the EU
- Customs duties payable on those imports
- VAT payable on the imports, but under a postponed accounting system, ie VAT accounted for on VAT returns, not at the point of entry to the UK
- Additional checks at the border as the goods enter the UK
- On the bright side, the requirement for Intrastat reporting is likely to cease.
Exporting goods from the UK to the EU
- Sales of goods will be zero rated for VAT, whether the sales are to EU businesses or consumers
- EC sales list requirements will cease.
Supply of services from the UK to the EU
- “Place of supply rules” for VAT will remain the same, ie usually where the customer resides. So supplies to EU countries would usually be zero rated
- EC sales lists will disappear.
Supply of services into the UK from the EU
- VAT to be accounted for under the reverse charge rules. For those unfamiliar with the rules, this is a VAT adjustment on your VAT return but does not result in any additional tax payable unless it relates to partially exempt supplies.
In summary, a no deal scenario will likely mean that UK businesses importing into the UK from the EU will face additional work and costs but those exporting to the EU have less to worry about.
Please note that this article is concerned with UK requirements only and you should always seek local advice for regulations within the countries that you do business with.
No one knows for sure what Brexit will look like, but some change is inevitable. It is essential that all businesses trading with the EU keep abreast of developments to ensure that they are prepared and can continue trading with the minimum disruption. Watch this space.
If you would like to discuss any of these matters in more detail, please contact James Durrant at james.durrant@mgr.co.uk. Detailed guidance and technical notices regarding Brexit can be found on the government website.
