Here are my top VAT Tips after Brexit as many issues will be very different from 1 January 2021 onwards.
VAT Tips after Brexit
Use VAT postponed accounting
Remember that a VAT registered business in GB can request postponed VAT accounting for worldwide imports of goods, not just for those coming from the EU. Using this system, VAT is not payable at the time the goods arrive but is accounted for as a reverse charge entry on the next VAT return. This helps enormously with the business’ cash flow.
Don’t forget that all exports will be zero-rated
Any goods that leave GB for another country will be zero-rated for VAT purposes. They will be subject to duty and VAT when they arrive in the other country. Don’t forget that proof of export must be retained to support the zero-rating (see VAT Notice 703, sections 6 and 7).
Consider using a freight forwarder
All imports of goods into GB will be subject to VAT, customs duty and customs declarations. Customs declarations are complicated; a lot of emphasis has been placed on the importance of ‘correct declarations.’ An experienced customs agent or freight forwarding company will be used by the majority of importers, rather than the process being done in-house.
Be aware of the new regime for low-value imports
If you buy goods from overseas suppliers, where the shipment value is no more than £135, you will need to account for VAT on your own return by doing a reverse charge entry in Box 1 and Box 4. If you are not VAT registered, you will get a VAT invoice from the overseas seller, who is obliged to register for UK VAT from 1 January 2020.
Don’t complete ESLs or Intrastat despatch returns
As customs declarations can be deferred for up to six months until 1 July 2021 for non-controlled imports of goods, HMRC still needs those UK businesses that come within the Intrastat rules to complete Intrastat arrivals. But EC Sales Lists and Intrastat despatch returns will disappear for all GB businesses.
However, businesses in Northern Ireland must still complete Intrastat despatch returns and also EC Sales Lists for goods, but not services.
Check if you need to register for non-Union VAT MOSS
Many businesses that supply broadcasting, telecommunication and electronic (BTE) services to non-business customers (B2C) in EU countries, will not be currently registered for Union VAT MOSS (mini-one stop shop) and thus will be charging UK VAT on their sales.
But the annual VAT MOSS sales threshold of €10,000 (£8,818) will no longer apply for UK businesses after 31 December 2020, and instead, a zero turnover threshold will apply. A UK business must register for the non-Union VAT MOSS scheme, even if it only makes one BTE sale to a B2C customer in the EU. The Union VAT MOSS scheme will no longer apply for UK-based businesses from 11.01 pm on 31 December 2020.
Can you claim extra input tax?
The legislation takes effect on 1 January 2021, meaning that input tax can be recovered in relation to sales of certain financial and insurance services to EU customers. In effect, the same VAT treatment will apply to EU and non-EU services.
Review rules for B2C services
The list of professional services in VAT Notice 741A, section 12 will be outside the scope of UK VAT from 1 January 2021 if supplied to EU customers B2C. They were previously subject to VAT under the general B2C rule.
However, check that you are not liable to register for local VAT in the customer’s country under any ‘use and enjoyment’ rules that might apply there.
Consider registering with the TSS
The Trader Support Service (TSS) is a free resource to help any business that trades in goods between GB and Northern Ireland. In effect, the TSS will advise and help with the necessary paperwork that will be needed when goods move from GB to Northern Ireland or vice versa. Register for the TSS now if this is relevant.
Make sure you have your GB EORI number
If you import or export goods, the GB EORI number is crucial. I understand that there are still some stragglers who haven’t applied for it yet. It only takes ten minutes to apply for it online, and HMRC will issue the number within seven days.