Actions to take ahead of January 31t
SUMMARY: No changes expected during transition period. Check out BCC’s Business Brexit Checklist for information on possible longer-term changes
During the transition period it would be business as usual for VAT. All VAT related provisions will stay as they currently are. No VAT registered business will be required to pay VAT upfront when moving goods between Great Britain and Northern Ireland, and that accounting for VAT can continue to be done through postponed accounting and UK VAT returns. VAT simplification measures, including the mini one-stop-shop, is expected to remain available to UK firms.
After the transition period, the UK would no longer be a member of the EU’s Customs Union and the Single Market. This means there will be a customs border between the UK and the EU. UK businesses will no longer be able to circulate goods freely throughout the EU and vice versa. The UK will no longer be in the EU’s VAT zone. As a result of a customs border in place between the EU and the UK, import VAT will also become applicable.
Currently, there is no detail on the future VAT regime for the UK post-transition. Earlier in 2019, the UK Government announced postponed accounting for import VAT as part of transitional measures in a no-deal scenario. Import VAT liabilities were to be settled via the business’s regular VAT return. It is uncertain whether this or any other simplifications would apply after the transition period.
Under the new proposal, separate provisions would apply to Northern Ireland (NI). After the transition period, NI would stay in the UK’s customs territory but would at the same time continue to apply the EU’s customs rules, tariffs, quotas and, partially, EU Single Market rules. NI would be part of the UK’s VAT area but will also be subject to EU’s VAT Directive and Court of Justice of the European Union rulings for trade in goods. Goods traded between NI and the Republic of Ireland (ROI) would still be considered intra-community supplies as they do now (the same rules would apply). However, goods going from GB to NI and then to ROI would be subject to EU’s import VAT. This VAT will not be remitted to the EU. The UK may also decide to align VAT rates applicable in NI to those in Ireland.
For services, however, NI will stay aligned with the UK VAT rules. This would potentially create issues around distinguishing between goods and services when it comes to VAT (in cases where there is a joint sale e.g. aftersales services or warranty). The Joint Committee will oversee the application of VAT provisions.