Post-Brexit VAT Issues that Need to be Considered

Post-Brexit VAT Issues that Need to be Considered

As you may know, Brexit is still marked by uncertainty, especially because the negotiations between the UK and the EU were not able to tell us how hard Brexit will hit.

Post-Brexit VAT Issues that Need to be Considered


Post-Brexit VAT Issues that Need to be Considered

If Brexit comes with a much-needed transition period, changes may not be that obvious. On the other hand, if Brexit comes without a deal, then companies will have to check VAT rates twice, to make sure that their eyesight is in order!

Why? Well, because it is strongly suggested that VAT will be impacted by Brexit and, on top of it all, businesses will suffer the most. Moreover, it is said that small businesses and startups may not be able to deal with these changes.


Practical Aspects of VAT

First of all, the changes caused by Brexit will affect mainly import VAT and cash flow, as follows:


  • Acquisition and dispatch – terms specific to the EU trading system – will become import and export.
  • Because of the above, VAT will affect cash-flow.
  • Traders that exceed the 2.3 million pounds threshold in which imports are included may have to deal with payments on account.
  • In the case of a no-deal scenario, a postponed accounting scheme will be introduced.
  • When it comes to the refund schemes for VAT from overseas, the UK will shift from the digital EU portal to a paper-based non-EU process.


There will also be a couple of simplifications and changes:


  • The reform of the EU VAT action plan.
  • Triangulation will no longer be available to UK businesses.
  • Call off stock; consignment stock; distance sales; indirect exports.
  • For assembled or installed goods, EU installers can choose their UK business – the customer – to account for VAT on all UK installations.
  • Goods on parcels will also see some changes – namely, consumers will be responsible for the VAT of parcels valued at more than 135 pounds, while overseas businesses will pay VAT on those valued at less than 135 pounds.
  • It is expected that the UK will no longer enjoy MOSS.


VAT and Brexit

Overall, when it comes to VAT, the single most important issue is the fact that any goods that come from the EU or go towards the EU from the UK will be considered as imports and exports – and no longer as intra-Community supply.

This means that the UK will no longer benefit from the free movement of goods within the EU. It will be treated as a third country and taxed as such.

On top of that, given that the UK VAT system currently accounts for roughly 20% of the entire fiscal revenue, it is highly unlikely that the government will change it after Brexit.

Therefore, businesses will have to deal not only with the VAT practiced by the UK but also with the VAT that will come with every import and export.


The Bottom Line

In the end, there are more than a couple of issues that need to be considered about VAT after Brexit.

On the one hand, businesses must understand that they will most likely have to pay more for the import and export of goods – even when they import/export the same quantity as they do now. Naturally, this will have severe effects on their cashflow.

On the other hand, there are also a lot of other things that businesses have to do in order to comply with the new VAT regulations. As mentioned above, they will have to start using the paper-based 13th Directive instead of the digital 8th.


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