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Brexit - what are the VAT implications?

Since the EU referendum in June there’s been much press speculation about the impact of the result. The Prime Minister has been clear: Brexit means Brexit. So, what should you be doing now in relation to VAT to prepare for it?

Although we don’t know the details of what the Brexit deal will look like we can make a number of reasonable assumptions.

UK VAT law to stay the same, for now

Initially UK VAT law will remain relatively unchanged, which means that domestic transactions and any transactions involving non-EU countries will remain the same as now.

VAT treatment of services

The VAT treatment of services supplied to or received from businesses in other EU countries is likely to be unchanged. We may, however, see an abolition of the requirements to quote customer VAT numbers on invoices and to report customer VAT numbers to HMRC on EC sales lists.

MOSS

UK suppliers of e-services to consumers in other EU countries will no longer have access to the EU version of mini one-stop-shop (MOSS), but will have access to the version of MOSS available for non-EU suppliers which works in a very similar way.

EU VAT registration

UK businesses supplying goods to consumers in other EU countries are unlikely to be required to abide by the distance selling regulations but suppliers may want to consider setting up an EU VAT registration in order to streamline VAT accounting and remain competitive with EU suppliers.

Customs control

Goods sold to businesses in continental Europe are likely to become subject to customs control, which could result in:

a. Import and export customs declarations.

b. Repeal of the requirement to file Intrastat returns

c. Repeal of the requirement to file EC sales list returns

d. Imposition of customs duty

e. Customs inspections at borders

f. A requirement to physically pay import VAT to HMRC on inbound shipments and then waiting to receive the HMRC import VAT certificate before being able to claim back the VAT

g. More complex treatment of chain and triangular transactions as the simplifications will no longer be available

It remains to be seen how Brexit will impact on the UK’s relationship with the Republic of Ireland. We have been told that there will be no reintroduction of customs control on the land border but it is likely that there will be more formality than there is now to prevent Ireland from becoming a back door to the UK.

So a greater degree of formality seems likely when trading with Europe as well as some adverse effects on cashflow. Hopefully HMRC will apply a light touch, but there is no guarantee that the fiscal authorities in Europe will follow suit.

Specific advice should be obtained before taking action, or refraining from taking action, in relation to the above. If you would like advice or further information, please speak to your usual Shipleys contact.

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