Brexit: Import/Export VAT and Duty

At 11pm on 31 December 2020 the UK will leave the EU and become a separate customs territory - as such a number of new rules and policies relating to import/export VAT and duty are due to come into effect from that point.

The subject of VAT and duty in itself is a complex one and is further complicated by the upcoming changes – what follows is a summary of some of the key points based on where we are now (and very much subject to change pending a UK-EU trade deal or otherwise!) but please contact us for advice bespoke to you on any particular area.

VAT on Goods to the EU

From 1 January 2021 the B2B sale of UK goods to the EU (where the customer is VAT registered) will generally be zero-rated with the recipient responsible for import duty and import VAT – therefore the reverse charge, EC Sales List and distance selling thresholds will no longer apply.

On the most part supplies of B2C goods (where the customer is not VAT registered) will incur UK VAT as is currently the case.

VAT on Services to the EU

From 1 January 2021 no UK VAT will be chargeable on most B2B services (where the customer is VAT registered), with the customer accounting for VAT in their recordkeeping.

Likewise with goods, most B2C services (where the customer is not VAT registered) will incur UK VAT as previously.

VAT MOSS (Mini One Stop Shop)

For those currently using VAT MOSS, for sales made from 1 January 2021 businesses will need to register for either:

• VAT MOSS in another EU member state as a ‘Non-Union Member’, or
• VAT in each EU member state where you sell digital services to consumers

EORI Numbers

UK businesses need a GB EORI (Economic Operator Registration and Identification) number in order to import from or export to the EU.

Many relevant businesses will already have one (especially given HMRC’s auto-enrolment of many earlier this year) however if you are unsure you should contact HMRC or apply for one here: https://www.gov.uk/eori

Businesses making customs declarations or getting a customs decision in other EU countries will need to apply for an EORI number in that particular country.

VAT on Imported Goods, Postponed Accounting and Duty Deferment Accounts

From 1 January 2021 businesses that are VAT registered, complete full customs declarations and have chosen not to defer them can adopt postponed VAT accounting to pay import VAT via their VAT return as opposed to paying on the arrival of the goods to the UK.

Non-VAT registered businesses (and those not using postponed VAT accounting) will need to report and pay import VAT through the customs processes as normal.

Businesses who import goods regularly and are unable to take advantage of postponed accounting can apply for a Duty Deferment Account (DDA), enabling customs charges to be paid monthly instead of on specific consignments as they arise.