What are my VAT obligations under a no deal Brexit?
Updated: Sep 29, 2019
A recent series of conversations on Twitter led us to understand that many common people misconstrue a No-deal Brexit to mean that there won't be a Brexit at all! Shocking as it may seem, there are many small-businesses that may not have a full awareness of how they could be affected in in a no-deal scenario with respect to their operations.
We have pooled together these notes to clarify some of the main issues surrounding the VAT scenario under a no-deal Brexit. We should add here that our experience dealing with multi-jurisdictional businesses has helped in understanding how to manoeuvre such scenarios should there be complex reporting required.
If you import and export goods, you probably already have this sorted. With a no-deal, the impact of free movement of goods across borders would be impacted.
An Economic Operator and Registration Identification / popularly referred to as the EORI number, allows you to get clearance for your goods faster in case the UK becomes akin to any other regular trading nation from EU's point of view. Please access the link here to apply for a EORI - https://www.gov.uk/eori.
Place of Supply
This is perhaps the single most important consideration for "serviced-based" businesses. If the UK loses it's single-market status, the "place where a supply happens"becomes critical. The determination of which country has the right to tax is dependent on where the supply takes place. To further complicate matters, it depends on whether it is a B2B or a B2C supply of services.
Clarification from HMRC reads,
- For UK businesses supplying digital services to non-business customers (the B2C model) in the EU, the ‘place of supply’ will continue to be where the customer resides. VAT on services will be due in the EU Member State within which your customer is a resident.
If you have a SAAS business for instance and the customer resides in France, the supply is completed at the customer's resident country - i.e. France. Any additional tax that a UK business have to pay in the EU could be reclaimed depending on the tax treaties that exist between that individual country and the UK - in this case between France and the UK.
So the blanket EU rules that the UK followed up until 29th March, 2019 would no longer apply.
So what happens should a customer levy a VAT at the point of receipt of supply? In such case, it would be possible to claim refunds from member states. The process then would be very similar to claiming refunds from a nation that does not have special treaty applications. The process can be completed online. Special rules apply to goods above £50,000 used in business. More guidance on this can be found via this link.
It would seem like a lot of changes are coming at the same time in terms of Making Tax Digital as well as possible changes that may impact under a no-deal Brexit. In the midst of all this, we should also remember that the personal tax year comes to an end on the 5th April 2019.
Updated Sep 29th
A foreign currency account - Consider opening a USD or Euro account if you have EU clients who might not prefer to pay you in GBP after the 31st of October. Moneycorp might be a good option to consider if your local UK bank does not offer foreign currency accounts.
1. No-deal Brexit guidance: VAT - https://www.lawsociety.org.uk/support-services/advice/articles/no-deal-brexit-vat/
2. All pictures used in the article are allowed for commercial use and sourced from pexels.com
4. Some of the comments (e.g - that of twitter) are based on our individual experiences and speaking with British nationals (the common folk). The views in the article are purely based on our assessment and understanding and for the purposes of the business blog - this does not represent a political view. In case you have a specific query for your business, please feel free to reach out via our Contact page.