No Deal Brexit and its Impact on VAT

The government and HMRC have recently updated their ‘partnership packs’. The packs were created with the intention of helping businesses prepare for customs changes in the event of a ‘no deal’ Brexit. The UK is set to leave the EU on 29 March 2019, below are key changes that will affect VAT registered businesses trading in the EU if a ‘no deal’ Brexit goes ahead.

UK business will have to apply customs, excise and VAT on goods traded in the EU if a ‘no deal’ Brexit goes ahead. These procedures will be similar to those currently applied when trading outside the EU. The government will attempt to keep VAT procedures as close as possible to what they are now, but there will be some specific VAT changes.

Postponed VAT for imports

The government will introduce postponed VAT accounting on imports bought into the UK. This means VAT register businesses can apply postponed VAT to their tax returns. Postponed VAT means it will not have to be paid at the time of/soon after the receipt of goods

Low-Value Consignment Relief (LVCR)

A ‘no deal’ Brexit will mean VAT will payable on goods entering the UK as parcels sent by EU businesses. LVCR will no longer apply these packages. For parcels valued up to and including £135 will be charged to the EU business sender.

VAT Mini One Stop Shop (VAT MOSS)

The UK will no longer EU-wide VAT IT systems. MOSS being one of them, the stop shop currently simplifies reporting for UK businesses.

Customs declarations

Currently, the EU countries can free move goods without having to make any customs import or export declarations. This will change if a no deal Brexit goes ahead, there will no longer be free circulation and movements of goods between the UK and EU.

HMRC is currently introducing its new Customs Declaration Service (CDS), which replaces the Customs Handling of Import and Export Freight (CHIEF) system.

From 11 pm on 29 March 2019, businesses will have to apply the same customs and excise rules to goods moving between the UK and EU countries as they currently do for non-EU countries. Moving forward import and export declarations will also have to be filed. A ‘no deal’ Brexit would also mean separate safety and security declarations need to be made by the carrier of the goods (airline, freight train operator or shipping line).