Ross McConnell - Kinross Based Chartered Accountant

Guidance for companies post-Brexit

by ROSS MCCONNELL on JANUARY 07, 2021

Services

Business to Business services between EU businesses will carry on pretty much as before – providing you have evidence that the customer is in business (and their VAT number is the best evidence of this) then you zero rate supplies to them. This is no change from the current position.

Business to Consumer supplies however has changed. Professional services, and this covers a wide range of consultancy type services, provided to consumers in EU, are now outside the scope of vat, so no VAT is chargeable.

Services bought by businesses from abroad will be subject to the reverse charge rule, the UK business charges itself vat and recovers if it appropriate on the vat return.  This again is unchanged.

 

Goods

This is where the main changes are.

Goods sold outwith the UK are zero rated, this now applies to goods sold to EU countries. However this leaves the EU customer having to pay import vat, which may not be commercially acceptable. The alternative for the UK business to act as importer, and register for VAT in each EU country they sell to, then they can charge the local vat when the goods are sold. The third option is to choose to hold stock in one EU country and fulfil orders from this EU country. This would require the UK business to register for VAT in that EU country, but in turn this would allow the import VAT to be paid (and recovered) by the UK business. As the UK business would then be registered for VAT in the EU country, the onward supply of the goods to the customers within the EU could then be treated as intra-EU supplies in the same way as currently, ie subject to the normal distance selling thresholds. Post July 2021 it will be possible to register in just one EU country, rather than in each EU country they sell to.

All goods brought into the UK from abroad, and this now includes the EU, will be liable to VAT on import. There is no longer an exemption for low value items under £15. This vat can be recovered by vat registered businesses, who can also chose to defer payment of the vat until the vat return is prepared, which means it can be declared and recovered on the same Return.

Goods sold online to the UK, and with a value less than £135, must have the vat paid at the point of sale. This will mean that online retailers based in EU selling goods to UK consumers under £135 will have to register for VAT in the UK and submit UK vat returns. If the goods are being sold to a vat registered business then the vat is dealt with on import.

If an Online Marketplaces (OMP) facilitated an import sale not exceeding £135, it becomes responsible for charging and reporting VAT.

Online sales by UK business to EU consumers will be zero rated as far as the UK is concerned, but the distance selling thresholds will be withdrawn, and so they may have to register for VAT in each EU country they sell to. Alternatively they could set up a presence and hold stock in one EU country. This would allow one EU vat registration, and they would still benefit from the distance selling thresholds.

From July 2021 EU wide reforms change the distance selling rules again. From July 2021 the distance selling thresholds are abolished across the EU, and a UK business can elect to register in one EU country and complete a Return detailing sales and declaring VAT across all EU countries.

 

Digital Services

There are additional rules for business which supply digital services to EU consumers. This applies to all electronically supplied services, including amongst other things website supply, or web hosting services, distance maintenance of programmes and equipment, supplies of software and software updates, or advertising space on a website

In these cases the UK business must register for VAT in each EU member state where they supply digital services to consumers.

 

EORI number

Finally if a business is exporting goods outwith UK (inc to the EU) then they will need an EORI number. This number is issued by HMRC, and applications are made online.

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