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No-deal Brexit guidance: VAT

Last updated: 6 September 2019

The Law Society has published guidance for solicitors that highlights the changes in civil and commercial cooperation that will occur should the UK leave the EU without having reached an agreement with the EU.

In this scenario, the EU and UK will have failed to sign a withdrawal agreement (governing the terms of the UK’s departure from the EU) and an agreement governing the future relationship between the two parties.

The UK will immediately leave the EU’s institutional structures without a transition period. In many areas, cooperation between the UK and EU will cease, and the applicable legal regime in many practice areas will change.

In this article we consider the changes to VAT in the event that the UK leaves without a deal and the impact this could have on VAT on goods and services.

Key points to consider in relation to VAT:

  • The UK will become a ‘third country’ for EU VAT purposes.
  • Suppliers of services, including legal services, to clients in EU member states should note that, following a no deal Brexit, the current rules for the place of supply of services will generally apply as if suppliers of services to an EU customer were to a third country customer.
  • However, the UK government would introduce postponed accounting for import VAT on goods brought into the UK, whether from the EU or elsewhere.
  • Generally speaking, all goods entering the UK as parcels sent by overseas businesses will be liable for VAT.
  • Exporters will need to be aware that import VAT and customs processes are likely to apply to goods on entry to the EU.
  • For UK businesses supplying digital services to non-business customers 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 in which the customer is a resident.
  • For supplies of insurance and financial services, the government has suggested that changes may be made to the input VAT deduction rules for such services where those services are supplied to the EU.
  • Businesses that sell digital services to consumers in the EU and that want to continue to use the MOSS system will need to register for the VAT MOSS non-Union scheme in an EU member state.
  • UK businesses will continue to be able to claim refunds of VAT from EU member states but in future they will need to use the processes for non-EU businesses. These processes vary across the EU and businesses will need to use the processes in the individual countries where they incur costs and want to claim a refund. It should be noted that the paperwork and the time limits for making claims are likely to be different to the current position.

Download the full guidance

Further guidance

This article forms part of a series of guidance on no-deal Brexit. Read our other guides relating to: