VAT position now the UK-EU Brexit trade deal is done

Some positive news ended the tough year with the UK finally reaching a Free Trade Deal with the EU. The EU-UK Brexit Trade and Cooperation Agreement deal will not change the Brexit Customs and VAT changes that came into place 1 January 2021.

The UK continues to Levy VAT and the rules relating to domestic transactions continue to apply as they previously did. On the whole VAT procedures remain as those prior to 31 December 2020 but there are some changes to VAT rules and procedures for transactions between the UK and EU member states.

Selling to the EU

As of 1 January, 2021 most goods exported to the EU will continue to attract a 0% UK VAT rate. Details on how and when you can apply zero-rated VAT to exported goods can be found here.

Now, traders have to pay import VAT when goods arrive at the destination country. With VAT being dealt with by member states, it is important that you are aware of the different rules in each member state about whether import VAT is liable at the border or whether the accounting of it can be deferred to the importer’s quarterly return.

UK VAT registered businesses no longer have to complete an EC Sales List. Instead, UK businesses exporting zero-rated goods to EU businesses need to retain evidence to prove that goods have left the UK.

Buying from the EU

VAT is liable to be paid on imports from the EU. The government will introduce ‘postponed accounting’ for import VAT on goods brought into the UK with effect from 1 January 2021. This means that UK VAT registered businesses importing goods to the UK will be able to account for import VAT on their VAT return, rather than paying import VAT on or soon after the time that the goods arrive at the UK border.

VAT on imported goods with a value of up to £135, will be collected at the point of sale, not the point of importation. Where goods are sent from overseas and sold directly to UK consumers, the overseas seller will be required to register and account for the VAT to HMRC. Overseas sellers will also remain responsible for accounting for the VAT on goods in the UK when sold directly to UK consumers.

Business-to-business sales not exceeding £135 in value are also be subject to the new rules. However, where the business customer is VAT registered and provides its registration number to the seller, the VAT will be accounted for by the customer by means of a reverse charge.

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