Due to the circumstances and timeline of the deal with the EU, it is very difficult to provide detailed guidance on what we all should be charging and detailing on our sales invoices.
More detailed guidance will follow when Government departments catch up and cement the final detail. For the moment, we have to research the matter ourselves and make our own assumptions on what is right for our businesses.
A key distinction with VAT, is business to business or business to customer or the final end user.
Another key distinction is the area in which you sell and its rules connected to that.
Another key distinction is the provision of goods or services as different rules can apply to each.
Our current understanding of the rules is as follows:
Business to Business to EU
Zero-rate the sale for UK tax purposes (providing the zero-rating criteria has been met) and report this in box 6.
Export evidence is required to for you the UK business.
Tax is applied in the destination country according to its import procedures.
Business to Customer to EU
Zero-rate , as with Business to Busines above.
Business to Business and Business to Customer to non EU countries
This is unchanged. Sellors should zero-rate for VAT purposes and record the value in the VAT return in box 6.
Tax is applied in the destination country via that country’s import procedures.
VAT returns in EU customer countries
For Business to Business and Business to Customers, the seller will need to consider who will pay import vat upon importation into the EU country.
If the seller wishes to do this, they will need to register for VAT in that country and consequently charge the customer vat of the destination country.
This is likely only to be the case if the seller wants to facilitate the sale by covering the foreign import vat.
Export of goods from GB as at 1 January 2021
Exporting Business to Business to non-EU nothing has changed.
Exporting Business to Customers to EU (not including MOSS) nothing has changed.
Business to Customers to EU (MOSS) should register for and start using the non-union MOSS to report sales of certain digital services to consumers in the EU. As such, they can no longer use the MOSS threshold, which allows businesses to apply VAT in their own country before having to apply VAT of the destination country for roughly the first £8k of relevant sales per year. This is likely to result in more UK businesses having to register for non-union MOSS, if they have not already.
Business to Customers to non-EU, nothing has changed. In general, UK VAT should be applied.
Business to Customer export of Services from GB as of 1 July 2021
Business to Customer sales of services to the EU that are subject to VAT in the country of the customer can be reported through the new One Stop Shop, which replaces the MOSS, for certain products sold to the consumer. This is again, is designed to stop you having to register in each EU state.
The placed supply rule continues to be used if clients make use of OSS.
Imports of goods over £135 and postponement VAT accounting
VAT is now payable on imports if they are over £135. This will create a negative cash flow impact for business and also potential holdups at Customs checkpoints until its paid.
The new postponement scheme provides the business an ability to use a mechanism very similar to the reverse charge.
Rather that physically paying for the import VAT and then reclaiming it back on the subsequent return, the VAT is accounted for as an input and an output on the same return.
Use of the scheme is optional.
Businesses can instead pay VAT upfront when the goods enter free circulation into the UK.
This will require them to obtain monthly C79 reports from HMRC, as is the case for non-EU imports.
VAT on goods imports-£135 and under
The government have used Brexit to add a number of other changes.
Low-Value Consignment relief was abolished as at 1 January 2021. This exempted imports with a value less than £15 from import VAT.
VAT on imports with a consignment value of £135 or lower have applied VAT at the point of sale, rather than applied as import VAT at customs.
For Business to Customer transactions this UK VAT is charged and collected by the seller but Business to Business this is the Customers concern.
If you receive goods of £135 or less as imports, you have to account for the VAT as part of the reverse charge procedure.
VAT on purchases of services from the EU or non-EU
This has not changed. Business to Business sales of services are generally subject to the tax in the country of the customer.
Therefore, UK VAT will be in most cases, applied by you via the reverse charge mechanism.
The Northern Ireland Protocol
Northern Ireland receives special treatment. If has one foot in the EU and one in the UK.
Trade goods with the Republic of Ireland and the rest of the EU, continue to treated as intra-community supplies and acquisitions.
However, transactions between Northern Ireland and the rest of the UK also continue in the same way was they were treated prior to Brexit.
As stated above, the guidance is limited so far but if you need any further detail, please contact your usual contact in the Spirare Team.