Deal or no deal: How will Brexit impact VAT?
In this article, our VAT consultant, Nicola Gladwell reviews and discusses some of the key points.
Who will be impacted?
In the event of a no deal, the government states that it will aim to keep the domestic VAT regime as close as possible to how it is currently operated.
However, there would need to be changes which would impact those with exposure to overseas VAT. This will include those importing goods from the EU, exporting goods to the EU, supplying services to the EU or interacting with EU VAT IT systems (such as the VAT Mini One Stop Shop – MOSS).
“It is expected that following a no deal scenario, the rules for trading with the EU will be broadly the same as those that currently apply to businesses that trade with countries outside of the EU”, says Nicola.
Submitting EU refunds
One point we would highlight from the governments guidance affects those who submit EU refund claim for VAT incurred in other member states.
In the event of a no deal, clients will no longer be able to access the EU refund system and will instead have to submit claims in the same way as other non EU businesses.
Non EU claims are submitted based on a year end 30 June with a submission deadline of 31 December of the same year, whereas EU claims work on a calendar year basis and have an extended deadline to 30 September.
“As such, we are recommending that clients submit claims for at least the period to 30 June 2018 by December 31 via the EU refund scheme so they are in the system before the UK leaves. Preferably, clients should submit all EU VAT claims for 2018 before 29 March 2019 if possible,” says Nicola.
In general, claims under the non-EU scheme are made on paper forms and there is a requirement to request an original Certificate of Taxable Status from HMRC (equivalent to a VAT 66A).
“Depending on which country you are submitting claims to, you may need to complete the country’s own form and complete it is its own language. Some member states do allow the use of the UK VAT form 65A and for the form to be completed in English. In all cases, supporting original invoices and receipts should be provided,” says Nicola.
Postponed VAT accounting on imports
It is also worth noting that HMRC are looking to introduce a postponed accounting arrangement for import VAT on goods imports from the EU and non EU in the event of a no deal as a means to reduce potential delays at ports.
“The introduction of postponed accounting (where import VAT is accounted for through the VAT return rather than paid and reclaimed) will be available for both imports from the EU and non EU and therefore provides some cashflow easement for all importers of goods to the UK,” says Nicola.
Many other EU member states already successfully operate postponed accounting for import VAT in various forms. Therefore, we await to hear further updates on this in the event of a no deal scenario.
Withdrawal agreement if a deal is reached
In the event a deal is reached with the EU, then it is expected that we will enter into a withdrawal agreement which will allow the UK indirect tax system to continue broadly as is until 31 December 2020.
“What happens after this date remains to be seen and with there being a major overhaul of the EU VAT system coming into effect from July 2022 as well, UK businesses need to be prepared for period of uncertainty and change when it comes to their VAT accounting and reporting,” says Nicola.
Full government guidance
You can read the full guidance on the .Gov website here.
Please contact our team if you would like to discuss our range of VAT services or for a quotation.