VAT for businesses if there’s no Brexit deal
Delivering the deal negotiated with the EU remains the government’s top priority. This has not changed.
However, the government must prepare for every eventuality, including a no deal scenario. For 2 years, the government has been implementing a significant programme of work to ensure that the UK is prepared to leave the EU on 29 March 2019.
It has always been the case that as we get nearer to that date, preparations for a no deal scenario would have to be accelerated. We must ensure plans are in place should they need to be relied upon.
In the summer, the government published a series of 106 technical notices setting out information to allow businesses and citizens to understand what they would need to do in a no deal scenario so they can make informed plans and preparations.
This technical notice offers guidance for continued planning in the event of no deal.
Also included is an overarching framing notice explaining the government’s approach to preparing the UK for this outcome in order to minimise disruption and ensure a smooth and orderly exit.
We are working with the devolved administrations on technical notices and we will continue to do so as plans develop.
The purpose of this notice is, in the event that the UK leaves the EU on 29 March 2019 with no agreement, to inform UK businesses of the implications for VAT rules for goods and services traded between the UK and EU member states. It outlines the impacts and gives information for businesses to take into consideration.
While the UK government is confident that it will agree a good deal for both sides, as a responsible government it will continue to prepare for all scenarios, including the outcome that the UK leaves the EU on 29 March 2019 without a deal.
This is contingency planning for a scenario that the UK government does not expect to happen, but people should be reassured that the government is taking a responsible approach.
It is important that businesses consider how a ‘no deal’ scenario could affect them, and begin to take steps to mitigate against such a risk. This technical notice provides further details to support early planning on VAT to help businesses understand the potential impacts, and government will provide further details, including specific actions that businesses should take, in due course.
For most UK businesses there will be no change to VAT rules. UK businesses that are affected may wish to consult other relevant technical notices, including the Trading with the EU if there’s no Brexit deal notice, which covers customs, excise and import processes at the border.
Before 29 March 2019
Under current VAT rules:
- VAT is charged on most goods and services sold within the UK and the EU.
- VAT is payable by businesses when they bring goods into the UK. There are different rules depending on whether the goods come from an EU or non-EU country.
- goods that are exported by UK businesses to non-EU countries and EU businesses are zero-rated, meaning that UK VAT is not charged at the point of sale.
- goods that are exported by UK businesses to EU consumers have either UK or EU VAT charged, subject to distance selling thresholds.
- for services the ‘place of supply’ rules determine the country in which you need to charge and account for VAT.
After 29 March 2019 if there’s no deal
The UK will continue to have a VAT system after it leaves the EU. The revenue that VAT provides is vital for funding public services. The VAT rules relating to UK domestic transactions will continue to apply to businesses as they do now.
If the UK leaves the EU on 29 March 2019 without a deal, the government’s aim will be to keep VAT procedures as close as possible to what they are now. This will provide continuity and certainty for businesses. However, if the UK leaves the EU with no agreement, then there will be some specific changes to the VAT rules and procedures that apply to transactions between the UK and EU member states. The government has taken decisions and actions where necessary in order to mitigate the impacts of these changes for businesses.
This note summarises the main VAT issues that will affect UK businesses trading with the EU in goods and services if the UK leaves the EU without an agreement on 29 March 2019. Although no changes will be made before then, this note highlights the VAT changes that businesses will need to prepare for when importing goods from the EU, exporting goods to the EU, supplying services to the EU, and interacting with EU VAT IT systems such as the VAT Mini One Stop Shop (MOSS). This technical notice details potential changes in each of these areas.
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