News and Updates
This newsletter is a departure from the usual format and deals only with the likely VAT implications of the United Kingdom’s departure from the European Union on 31 December 2020. At the time of writing (6 December) there is still a possibility that a trade deal will be reached; but as Matthew Parris said in yesterday’s Times, deal or no deal we will soon be trading with the EU as a “third country”: from outside their club. It is unlikely that anything which follows will change fundamentally. Some of it is already enshrined in law or has been published by H.M. Revenue & Customs.
VAT will be due on imports, whether from EU member states or from countries outside the EU. Rather than paying import VAT to HMRC and reclaiming it on the VAT return following receipt of form C79, importers may choose to use “postponed import VAT accounting” (PVA). No authorisation is needed for this, and the importer should simply ask its freight forwarder to make an appropriate entry on the single administrative document (import entry form) by entering “G” as the method of payment in box 47e. No import VAT is paid, but the importer adds the import VAT to box 1 of its next VAT return, and also adds it to box 4 if the goods are for use in the importer’s business. The value of the goods is added to box 7.
The importer will receive a postponed import VAT statement to help with the completion of the VAT return. This will be downloadable. If the statement has not been received by the time the VAT return is submitted, the import VAT must be estimated and later adjusted if necessary.
On occasion, the traditional method of paying and reclaiming import VAT must be used. For example, postponed import VAT accounting cannot be used if the importer does not own the goods, as explained in Brief 15(2020).
The use of PVA is optional, but it is likely that most importers will use it, given the cash flow benefits.
If goods with a value of £135 or less are sold direct to a UK customer from outside the UK after 31 December 2020, supply VAT rather than import VAT will be due. The overseas seller will need to register for VAT in the UK. If the goods are sold via an online marketplace (OMP), the OMP will be liable for VAT.
HMRC published VAT for Businesses if there’s no Brexit Deal in August 2018 (see my newsletter of February 2019). This explained that all sales of goods to customers in the EU will be treated as exports. There will be no EC sales list to complete, and the rules in VAT Notice 703 will need to be followed (goods must be exported within three months after the date when the customer makes final payment, and evidence of export must be retained).
If the goods are sold to a business in another EU member state, the customer must act as an importer. This has prompted some businesses to seek registration for VAT in the EU member
of state of destination: the seller would then act as exporter as well as importer and charge local VAT to the customer.
For sales of goods to individuals in EU member states on or after 1 July 2021, VAT will be due in the customer’s country. For a UK seller, it will be necessary to register for VAT in the seller’s country or use the “non-Union one stop shop” (OSS) scheme, using the OSS registration to account for VAT on all sales of goods to individuals in the EU.
HMRC have announced that the sale of goods from Great Britain to Northern Ireland will be subject to UK VAT as it is now. However, Northern Ireland will remain part of the EU’s VAT territory, so goods sold from Northern Ireland to a VAT-registered customer in an EU member state will continue to be zero-rated.
A UK business dispatching goods to the EU will no longer complete Intrastat returns from 2021. For arrivals from the EU, Intrastat will be needed for the whole of 2021.
Intrastat is still needed for movements of goods between Northern Ireland and the EU.
UK businesses incurring VAT in an EU member state may currently reclaim it via the intra-EU VAT reclaim scheme. For VAT incurred in 2020, a reclaim can be made until 31 March 2021. After this date, UK businesses can reclaim VAT incurred in an EU member state using the “Thirteenth Directive” scheme, and the rules vary from country to country.
Most supplies of services will continue to follow the general rule:
Business to business services are taxed where the customer belongs. Where a supplier in one country supplies services to a customer belonging in another country, the customer usually accounts for VAT using the reverse charge procedure.
There continue to be exceptions to the general rule: land-related services are taxed where the underlying land is situated; admission to events is taxed where the event takes place.
Services to consumers are taxed where the supplier belongs. Again, the exceptions which currently apply will usually continue to do so.
If a UK supplier supplies “intangible” services such as consultancy to a private individual in another EU country, at present VAT is charged, If these services are supplied to a private individual outside the EU, no VAT is charged. From 2021, no VAT will be charged to a private individual in any country outside the UK. This may
be subject to any “use and enjoyment” override in the country in which the customer resides.
If a UK supplier supplies e-services to a private individual in another EU member state, at present the supplier usually registers for the “Mini One Stop Shop” scheme (MOSS) and accounts for VAT in the customer’s country via a MOSS return submitted to HMRC. From 2021, the position will be similar except that UK suppliers will need to register in another EU member state for the “non-Union MOSS scheme”.
The above is not necessarily a complete list of changes to VAT rules, but I have concentrated on the most important areas. P.D. Hughes Consultancy Services Ltd is not liable for any loss arising from reliance on these notes.
If you have any questions about any of the above, please get in touch. During the pandemic I have presented a number of VAT training courses online using Zoom. Once circumstances allow I can visit your premises to provide face to face training or consultancy.
I qualified as a Chartered Accountant in 1997 with Malthouse & Company, a practice in Liverpool City Centre, and moved on in 1999 to work in property management. In January 2004 I started my own practice, initially in Birkenhead but then in York from 2008.
Many of my clients have been with me since the mid-2000s and value the personal and prompt service I offer, whether they need in house VAT training, a visit to discuss VAT issues or ad hoc advice over the telephone or by email. Any telephone advice I give is followed up within a short time by an emailed summary.
Peter Hughes, M.A., F.C.A.
11 Sails Drive,
Heslington,
York
YO10 3LR
Tel 01904 421570;
Mobile: 07801 810694
P.D. Hughes Consultancy Services Ltd
Company No 06841251 (Registered in England & Wales)
peter@pdhughesconsultancy.co.uk
www.pdhughesconsultancy.co.uk
6 December, 2020