This article refers to the new rules imposed by the British government and EU pertaining to the United Kingdom leaving the European Union. You can find the official government information on VAT here.
Firstly, a simple one, how does VAT change domestically?
The answer is, it doesn’t. Domestic VAT rules has remained the same following the end of the Brexit transition period, so if you only trade within the UK, then you are in luck and nothing needs to change!
If, however, you trade with other countries, please see below…
What did my VAT return look like prior to Brexit?
- You didn’t have to register in each individual country for VAT, instead a common set of rules applied in relation to VAT.
- The UK was able to use various VAT simplifications to make the calculation a lot easier.
- The UK had access to the online VAT refund process.
What has changed?
- You must now treat any EU country as you do other countries in the world.
- Trade with EU is no longer called “dispatches and acquisitions” but rather “imports and exports” which essentially means the VAT is payable upon import.
However, the UK government has introduced a postponed VAT system to avoid cash flow issues. This means you pay for the VAT on your VAT return rather than at the border.
This is available for all imports, regardless of if it is from the EU or not. You’ll receive a notice from HMRC on how much VAT is due, and you will use this to fill in your VAT return.
A few other things to note about your new VAT return:
– They have removed the Low Value Consignment Relief (LVCR), which previously allowed for imports with a value below £15 to be exempt from VAT.
– Online marketplaces (OMPs) are responsible for collecting and account for the VAT when they are involved in facilitating the sale.
– VAT on imports with a consignment value of £135 or lower have VAT applied at the point of sale, rather than applied at customs. This means foreign sellers who sell goods to the UK will need to charge UK VAT and apply to be part of the UK VAT system.
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I am sure you still have some questions! The news rules aren’t simple. Book a quick call with one of our experts or email us if you’d like to find out more about how your specific business is affected by the new Brexit rules. Also make sure to claim your 50% off your first month of bookkeeping until February 20th, 2021.
