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VAT IN ENGLAND
from Taxploration No 02
by Union Print
PETER HUGHES
Peter Hughes is a freelance chartered accountant based in York in Northern England and specialising in VAT. He has clients in various parts of the UK and also a few in other countries. His expertise lies in crossborder supplies of goods and services, property and partial exemption.
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The UK officially left the EU on 31 January 2020 and has now entered into a transitional period which will last until 31 December 2020. During this time, the UK will remain in the EU VAT territory and EU VAT rules will continue to apply.
VAT in England - after BREXIT
The body which administers VAT in the UK, H.M. Revenue & Customs (HMRC), published some guidance notes “VAT for businesses if there’s no Brexit deal”, although the document has now been archived. Nevertheless, it gave some useful pointers as to how VAT might work once the UK is outside the EU VAT territory The important points were as follows:
There would still be a VAT system in the UK, with procedures closely aligned with the current system. Businesses importing goods into the UK would use “postponed accounting” for import VAT. They would account for VAT on their VAT return rather than paying import VAT when or soon after the goods arrive in the UK. A number of EU member states already use postponed accounting, an example being the Netherlands. Currently if a UK business sells and dispatches goods to a consumer in another EU member state, UK VAT must be charged, or if the volume of such sales to consumers in a particular member state exceeds the “distance selling threshold” in a year, VAT must be charged in that member state. After Brexit with no deal, such sales would be zero-rated exports. EC sales lists would no longer be required for sales by UK suppliers to EU businesses. The main “place of supply” rules for cross-border services would remain unchanged. Businesses which sell digital services to consumers in other EU member states are liable for VAT in those member states, although most use the MOSS (mini one stop shop) system. UK businesses which want to continue to use the MOSS system would need to register for the VAT MOSS non-Union scheme in an EU member state. This can only be done after the date the UK leaves the EU VAT territory.
It is important to note that the above represents the position should no trade deal be reached. It may be ambitious to expect that a trade deal with the EU can be agreed by the end of 2020. With regard to import VAT, the Government has already passed The Value Added Tax (Accounting Procedures for Import VAT for VAT Registered Persons and Amendment) (EU Exit) Regulations 2019, which come into force from a date to be announced. The Government has yet to confirm whether postponed accounting would apply in circumstances other than a no-deal Brexit.
During the transition period, it will still be possible for a UK business to reclaim input tax incurred in another EU Member State, subject to the usual rules. There has been some confusion on this point, not helped by HMRC publishing guidance to the effect that no input tax could be claimed under the EU VAT refund scheme after 31 January 2020. This is incorrect and has now been updated. The guidance now says that the scheme can be used until 31 March 2021. Consequently, any UK business which incurred VAT in another EU Member State in 2019 (for example on subsistence during a business trip, or in the course of buying or importing goods in a Member State and selling them onwards in the same Member State) will have until 30 September 2020 to make the claim for repayment.
Peter Hughes is a independent chartered accountant practising independently in the UK. He has spoken three times at the Malta Institute of Management’s VAT and EU Conference.
ADVANCE DIPLOMA IN INTERNATIONAL TAXATION
The Advanced Diploma in International Taxation (ADIT) is the only International recognized Diploma in Taxation in Malta through the Chartered Institute of Taxation (UK), which is the leading taxation professional body in the United Kingdom and is delivered in Malta through the Malta Tax Academy. This internationally recognised qualification is considered to be at a level of a post graduate professional qualification.
