What are the changes for those importing goods from EU member states to the UK?
- UK VAT registered businesses can account for import VAT at the time of their VAT return rather than having to pay it soon after the goods arrive in the UK from 1 January 2021 after the introduction of ‘postponed accounting’
- All goods movements will require customs declarations and payment of any other duties will still be required
- Some goods will be subject to customs duty (tariffs)
- Alcohol, tobacco, and certain energy products will be subject to excise duties
- A duty deferment account can be used monthly by UK businesses to defer and settle customs and excise duty payments. To open the account, taxpayers will need to register with HMRC and provide a bank guarantee
- UK VAT on transactions with a value of up to £135 will be collected when selling to UK customers. This means that the UK Supply VAT rather than import VAT will be due on these items
- Collection and accounting for UK VAT will be done by businesses operating as Online marketplace (OMPs) and facilitating the sale of imported goods – even when the goods are in the UK at the point of sale
- The overseas seller is required to register and account for UK VAT to HMRC where goods are sold directly to UK consumers and sent from overseas. They are also responsible for accounting for the VAT on goods in the UK when sold directly to UK consumers
- New rules will apply to business-to-business sales not exceeding £135 in value. However UK VAT will be accounted for by the customer by means of a reverse charge mechanism where the business customer is VAT registered and provides its VAT registration number to the seller.
What is the new rule for exporting goods from the UK to the EU?
- Zero-rate sales of goods to EU businesses will continue for VAT registered businesses
- Goods entering the EU from the UK will be treated the same way by the EU member states as the ones entering from other non-EU countries
Therefore, upon the goods arriving in the EU, import VAT and any customs duties (tariffs) will be due.
What is the use of a Common Transit Convention (CTC)?
Use of CTC means that customs duties and declarations will not have to be dealt with at every border and helps defer import VAT and customs duties until goods reach their final destination.
Is a guarantee needed to cover import VAT or customs duties?
To cover import VAT or customs duties while the goods are in transit, businesses should check if a guarantee is needed. Also, to mitigate its impact, new procedures are also being implemented.
What is a Distance Selling Threshold?
- When sales are made to non-taxable persons, non-VAT registered businesses, or consumers, it is known as distance selling.
- Exporters with low value of sales in other EU states were able to benefit from distance selling thresholds previously.
- Similarly, unless the supplier has registered for VAT in the country of destination, sales below the distance selling threshold were subject to UK VAT.
- Please note that this facility is no longer available as of 1st January 2021
Does the EC Sales List need to be completed?
- An EC Sales List does not have to be completed by UK registered VAT business any longer.
- To prove that goods have left the UK, UK businesses exporting zero-rated goods to EU businesses need to retain evidence.
- Please note that this proof is already required for exports to non-EU countries.
- Click here for more information.
What are the new rules for supplying services to the customers in EU member states?
- From 1 January 2021, supply of services to customers will be treated similar to any customers outside the EU and will be covered by the ‘place of supply’ rules.
- The ‘place of supply’ continues to be where the customer resides for UK businesses supplying digital services to non-business customers.
- Therefore, VAT is due in the EU member state in which the customer resides.
- Please also note that the input VAT deduction rules changed from 1 January 2021 for UK businesses supplying certain insurance and financial services.
- As a result, supplies previously exempt became outside the scope with recovery. Thus, aligning with the existing rules for supplies of such services to customers outside the EU.
Are there any specific rules for digital services with regards to exports from UK to EU?
- All supplies of digital services to consumers in EU member states will be liable for VAT in the consumer’s member state after 31 December 2020 and must be declared to the relevant EU member state.
- UK businesses using the UK VAT Mini One Stop Shop “MOSS” union scheme ned to register for the VAT MOSS non-union scheme in an EU member state.
- Businesses must register for the scheme by the 10th of the month following their first sale after the UK leaves the EU if they wish to continue using MOSS.
- For instance, if a sale is made in January 2021, they should register by 10th February 2021.
- Organizations can also register in each EU Member State where they make sales alternatively.
- Non-UK businesses previously using UK VAT MOSS non-union scheme through the UK will now need to register for the scheme in an EU member state.
What are the specific rules for services in relation to exports from UK to EU?
Sales of digital services to UK consumers need to be declared by non-UK businesses by registering for the VAT in the UK and declaring the sales via a UK VAT return.
What is the EU VAT Refund System?
- The existing VAT refund system for non-EU businesses will have to be used by UK businesses to claim eligible refunds of VAT from EU member states.
- It may be important to mention that businesses will need to check the requirements in each EU country where they incur VAT as the operation of refund system varies across each EU country. To find out how to claim a refund of VAT paid in an EU member state, click here.
What is a VAT Registration Number Validation service used for?
The EU VAT Registration Number Validation service allows businesses to check if a customer or a supplier’s VTA number is valid. To check the validity of EU businesses, UK businesses will continue to use the EU VAT number validation service. However, the UK VAT registrations will not be included any longer. To ensure that UK VAT numbers keep getting validated, HMRC has developed a service.
Click here to check the EU VAT numbers
Need More Help?
Lanop Business and Tax Advisors are your trusted partners in navigating the complexities of post-Brexit VAT changes. Our expert team is dedicated to assisting you at every step of the journey. We start by assessing the impact of Value-added tax changes on your business operations and finances. Our goal is to ensure a clear understanding of new regulations.
We specialise in unravelling VAT complexities related to logistics and distribution, imports and exports, optimising supply chains, and facilitating EU-wide VAT registration. Our tailored solutions minimize liabilities and enhance compliance through efficient tax planning strategies.
With our guidance, you can confidently manage VAT recoveries, handle cross-border transactions, and ensure ongoing adherence to VAT regulations. Lanop Tax Advisors empower your business with knowledge, strategies, and practical support to thrive in the evolving VAT landscape.