The effects of Brexit on VAT

11pm on 31 January 2020 will see the UK officially leave the EU and no long be an EU Member State.

The Withdrawal Agreement the UK agreed with the EU provides for a transition period from the day of Brexit up to 31/12/2020 but allowing that transition period to be extended if required.

We have known for a while that, during the transition period, the VAT treatment of sales and purchases of goods and services between the UK and the EU will continue to be treated in the same way as before 31/1/2020:

  • UK businesses selling goods to the EU will continue to zero-rate sales of goods to VAT registered customers in the EU where those goods move from the UK to the EU and will still be required to submit EC Sales Lists for these supplies.
  • Businesses buying goods, from EU suppliers, that move from the EU to the UK will continue to receive these zero-rated as intra-EC supplies and will continue to treat them as EC Acquisitions on their UK VAT return.
  • UK businesses providing services that fall under the Business to Business rule for Place of Supply of Services to businesses based in an EU Member State will continue to treat the sale as outside the scope of UK VAT, supplied under the Reverse Charge and still declare the supply on an EC Sales List if the business customer is registered for VAT.
  • UK businesses receiving services that fall under the Business to Business rule for Place of Supply of Services from a supplier within the EU will continue to apply the reverse charge treatment on their UK VAT return.
  • UK businesses providing digital services to non-business customers in the EU will continue to have to account for VAT in the country in which the customer belongs and declare these sales under VATMOSS, subject to the VATMOSS threshold.

However there continued to be questions over exactly how, after Brexit, UK based suppliers of digital services would access and use VATMOSS, how suppliers of digital services based outside the UK supplying those services to customers in the UK would declare the UK VAT payable on these supplies and how UK businesses incurring VAT in other EU Member States would make claims under the EU Refund Scheme after Brexit.

HMRC

This was because HMRC’s guidance was simply out of date and implied that after Brexit businesses in the UK would not be able to access VATMOSS or the EU Refund Scheme via their HMRC via their HMRC portal and would instead have to make alternative arrangements and that suppliers based outside the UK supplying digital services to customer in the UK would no long be able to use VATMOSS and would instead have to registered for VAT in the UK.

That is until yesterday; a day before Brexit!

HMRC have now updated their guidance (see links below) in regard to access to both VATMOSS and the EU Refund Scheme and in regard to supplies of digital services to UK customers from suppliers based outside the UK.

The updated guidance now confirms that up to 31 December 2020, the proposed end of the transition period, UK business will continue to have online access to both VATMOSS and the EU Refund Scheme claim system.

It also confirms that during that time businesses outside the UK supplying digital services to customer in the UK can continue to use VATMOSS to declare the VAT due on these supplies.

It is unknown whether the use of and access to VATMOSS and the EU Refund Scheme will be extended if the transition period is extended.

It would be logical to believe they would be but, given HMRC’s record, we may not know until very near the time!    

Useful Links:

https://www.gov.uk/guidance/pay-vat-when-you-sell-digital-services-to-eu-customers-after-brexit

https://www.gov.uk/guidance/claim-vat-refunds-from-eu-countries-after-brexit

https://www.gov.uk/guidance/pay-vat-when-you-sell-digital-services-to-uk-customers-after-brexit

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