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, 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.

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.

Import 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 from the a UK VAT perspective 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, 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 from a UK VAT perspective 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 EU lies on the UK seller’s side
• DAP, 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

Import VAT is due and liability is dependent on the Incoterm.

To the EU:

• Export is zero-rated from UK VAT’s perspective
• Import VAT will be due
• Liability is dependent on the agreed Incoterm
• If the goods are compliant with UK-EU’s FTA Rules of Origin (RoO), no VAT will be due upon claiming preferential treatment
• Payment may be postponed upon importation
• VAT registration may be required
• Possibility of account and deduct VAT on the Member State of registration

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
• Possibility of account and deduct VAT
• Check if there’s an UK FTA in place – preferential treatment

Importation into the UK:

• Import VAT is due
• Liability is dependent on the agreed Incoterm
• For goods coming from the EU complying with UK-EU FTA’s Rules of Origin, preferential treatment may be claimed and no VAT will be charged
• 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 Northern Ireland import VAT will be due and the liability is dependent on the agreed Incoterm.

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
• If the goods are compliant with UK-EU’s FTA Rules of Origin (RoO), no VAT will be due upon claiming preferential treatment
• Payment may be postponed upon importation
• VAT registration may be required
• Possibility of account and deduct VAT on the Member State of registration

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
• Possibility of account and deduct VAT
• Check if there’s an UK FTA in place – preferential treatment

Importation into the UK:

• Import VAT will be due.
• Liability depending on the Incoterm.
• If the goods coming from the EU comply with UK-EU FTA’s Rules of Origin, preferential treatment may be claimed – no VAT will be charged.
• 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), or 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 Northern Ireland, import VAT is due and the liability is dependent on the agreed Incoterm.

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)
• Possibility of account and deduct VAT on the Member State of registration

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
• Possibility of account and deduct VAT
• Check if there’s an UK FTA in place – preferential treatment

If the finished goods are sold in the UK, then UK VAT rules apply. If the finished goods are sold in Northern Ireland, import VAT is due and the liability is dependent on the agreed Incoterm.

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
• If the goods are compliant with UK-EU’s FTA Rules of Origin (RoO), no VAT is due upon claiming preferential treatment
• Payment may be postponed upon importation
• VAT registration may be required – distance selling threshold
• Possibility of account and deduct VAT on the Member State of registration

If the finished products 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
• Possibility of account and deduct VAT
• Check if there’s an UK FTA in place – preferential treatment

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

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

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

Importation into the UK:

• Excise duties will be due upon importation
• Liability is dependent on the agreed Incoterm
• Excise goods may be moved within the UK under excise duty suspension through authorised warehouses

If the finished goods are then sold to the UK, then the UK’s excise duty rules apply.

If the finished goods are sold to Northern Ireland:

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

If the finished goods are sold 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

If the finished goods are sold to the RoW:

• Excise duties are 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 being sold to Northern Ireland, import VAT is due and liability is dependent on the agreed Incoterm.

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
• If the goods are compliant with UK-EU’s FTA Rules of Origin (RoO), no VAT is due upon claiming preferential treatment
• Payment may be postponed upon importation.
• VAT registration may be required – distance selling threshold
• Possibility of account and deduct VAT on the Member State of registration

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
• Possibility of account and deduct VAT
• Check if there’s an UK FTA in place – preferential treatment

To the UK

UK VAT rules apply.

To Northern Ireland

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
• VAT registration may be required – VAT registration may be required – either for B2B or B2C (distance selling)
• Possibility of account and deduct VAT on the Member State of registration

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
• Registration may be required
• Possibility of account and deduct VAT

For intermediaries, the place of supply of their services in B2B transactions is the place of supply where the customer belongs.

If the intermediary provides services either to the EU or RoW, the supply will be zero-rated from a UK VAT perspective.

Importation into the UK:

• Excise duties are due upon importation
• Inward processing may be applied for
• Excise goods may be moved within the UK under excise duty suspension through authorised warehouses

If the processed goods are then sold to the UK then UK excise rules apply to the finished goods.

If the processed goods are sold to Northern Ireland:

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

If the processed goods are sold 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

If the processed goods are sold to the RoW:

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