Understanding VAT after Brexit

Goods and services transactions inside the UK are under the UK’s VAT scope so the same rules and procedures continue to apply – more information on GOV.UK.

For goods coming from outside of the UK (from the EU or RoW), import VAT will be due, with the liability of the VAT dependent on the agreed Incoterm:

• DDP – liability for import VAT lies on the seller’s side
• DAP, FCA, ExW – liability lies on the UK buyer’s side

For services provided by suppliers in other countries, the UK buyer may have to account for VAT by applying the reverse charge mechanism. Learn more about this mechanism on GOV.UK. 

UK VAT rules related to transactions in services apply across the whole of the UK, and HMRC continues to be responsible for the operation of VAT and collection of revenues in Northern Ireland.

VAT is due on goods that enter Northern Ireland from Great Britain, and the same will also broadly apply to goods entering Great Britain from Northern Ireland.

Transactions in goods between Northern Ireland and EU businesses and consumers continue unchanged.

The supply of goods and services by UK businesses are liable for EU VAT.

UK businesses supplying goods or services to the EU may need to register for VAT in each Member State:

• If they exceed that country’s VAT-taxable threshold in a calendar year (B2B transactions)
• If they are supplying services to consumers above or distance selling above each Member State’s threshold (B2C transactions)

Exports are zero-rated for VAT and proof of export is needed.

Import VAT is due with the liability dependent on the agreed Incoterm:

• DDP – liability for import VAT in the EU lies on the UK seller’s side
• DAP, FCA, ExW – liability lies on the buyer’s side

Import VAT may be deferred in the EU, whereas it is usually payable upon importation, provided that either:

• The EU Member State applies postponed VAT accounting
• VAT deferment account is established
• The freight forwarder or the customs agents agrees to pay import VAT on their deferment account
• EU customs special procedures are used to delay payment of duties and import VAT

For UK businesses registered for VAT purposes in an EU Member State, they may be able to reclaim input VAT related to their activities in that country.

Exports are zero-rated for VAT and proof of export is needed.

Import VAT/Sales Tax is due (if applicable in the destination country) and the liability is dependent on the agreed Incoterm:

• DDP – liability for import VAT in the overseas country lies on the UK seller’s side
• DAP, FCA, ExW – liability lies on the buyer’s side

Different countries may have specific duties and import VAT/Sales Tax arrangements that allow importers to postpone or suspend their payment. VAT/Sales Tax registration may also be required.

To the UK

UK VAT rules apply.

To NI

UK VAT rules apply. 

To the EU:

• Export is zero-rated from UK VAT’s perspective
• Import VAT will be due
• Liability is dependent on the agreed Incoterm
• Payment may be postponed upon importation
• VAT registration may be required

To the Rest of the World (RoW):

• Export is zero-rated from a UK VAT perspective
• Import VAT/Sales Tax may be due
• Liability is dependent on the agreed Incoterm
• Payment may be postponed upon importation
• Registration may be required

Importation into the UK:

• Import VAT is due
• Liability is dependent on the agreed Incoterm
• Payment may be postponed upon importation
• Inward processing may be applied for – no duties or import VAT will be charged if the components are processed and then re-exported

If the goods are sold to the UK then UK VAT rules apply.

If the goods are sold to the EU:

• Export is zero-rated from a UK VAT perspective
• Import VAT will be due
• Liability is dependent on the agreed Incoterm
• Payment may be postponed upon importation
• VAT registration may be required

If the goods are sold to the RoW:

• Export is zero-rated from a UK VAT perspective
• Import VAT/Sales Tax may be due
• Liability is dependent on the agreed Incoterm
• Payment may be postponed upon importation
• Registration may be required

Importation into the UK:

• Import VAT will be due.
• Liability depending on the Incoterm.
• Payment may be postponed upon importation.
• Customs warehousing may be applied for – duties and import VAT are suspended until the goods enter free circulation (UK). No import duty or import VAT is payable if goods are re-exported. 

If the processed goods are sold to the UK, then UK VAT’s rules apply.

If the processed goods are sold to the EU:

• Export is zero-rated from a UK VAT perspective
• Import VAT is due
• Liability is dependent on the agreed Incoterm
• Payment may be postponed upon importation
• VAT registration may be required – either for B2B or B2C (distance selling)

If the processed goods are sold to the RoW:

• Export is zero-rated from a UK VAT perspective
• Import VAT/Sales Tax may be due
• Liability is dependent on the agreed Incoterm
• Payment may be postponed upon importation
• Registration may be required

To the UK

• UK excise rules apply
• Liability is dependent on the agreed Incoterm
• Excise goods may be moved within the UK under excise duty suspension through authorised warehouses

To Northern Ireland

• An excise duty charge arises when the goods enter Northern Ireland
• You can offset the excise duty already paid in Great Britain against this liability
• In almost all cases this will result in no further excise duty being payable on entry to Northern Ireland

To the EU

• Excise duties are due upon importation
• Liability is dependent on the agreed Incoterm
• Possibility of moving goods under excise duties suspension through authorised warehouses

To the RoW

• Excise duties may be due upon importation
• Liability is dependent on the agreed Incoterm

If selling to the UK, then UK VAT rules apply.

If the finished goods are sold to the EU:

• Export is zero-rated from a UK VAT perspective
• Import VAT is due
• Liability is dependent on the agreed Incoterm
• Payment may be postponed upon importation
• VAT registration may be required – distance selling threshold
• Possibility of using the Import One Stop Shop if the value of the goods is below €150

If the finished goods are sold to the RoW:

• Export is zero-rated from a UK VAT perspective
• Import VAT/Sales Tax may be due
• Liability is dependent on the agreed Incoterm
• Payment may be postponed upon importation
• Registration may be required

To the UK:

UK VAT rules apply.

To the EU:

• Place of supply rules apply
• Supply is zero-rated from UK VAT’s perspective if the supply is located in the EU and the purchaser is a VAT registered business
• VAT registration may be required – VAT registration may be required – either for B2B or B2C (distance selling)
• If the purchaser is not VAT registered then VAT is added to the invoice

To the RoW:

• Place of supply rules apply
• Supply is zero-rated from UK VAT’s perspective if the supply is located outside the UK and the purchaser is a VAT registered business
• If the purchaser is not VAT registered then VAT is added to the invoice