15 Mar Business After Brexit – How Vat Will Change
The UK left the European Union on 31st January 2020. After this exit, business continued as usual during this transition period until 1st January 2021 when new rules and regulations were put in place. Once these changes were put into effect, businesses had to make significant adjustments when it came to imports and exports, as the UK does not operate within the EU customs and VAT systems. Here is what you need to know about business after Brexit – how vat will change.
Value added tax is a tax that is charged on consumption of services and goods. Businesses charge customers the tax during sales and then remit it to the government. Before Brexit, the UK was within the EU tax system, so the United Kingdom did not have to apply for VAT in each EU country, but after Brexit, the United Kingdom has to treat countries in the EU the same way they treat non EU countries.
Some of the changes in terminologies include the use of the term export and import. Before the change, the terms used were dispatches and acquisitions. This tax is paid when importing. The government has introduced the postponed tax system, whereby goods that are imported into the country are accounted for in the next returns. This is to prevent a disruption in cash flow for businesses.
When it comes to provision of services, there shall be no need to distinguish customers resident in the EU and those who are non-EU residents. Billing shall be done in the same way, which shall make the work of businesses easier. Billing of professional services, such as legal service and consultancy shall be outside the scope of value added tax.
For digital services, it shall no longer be possible to account for the tax through the MOSS tax return. Businesses in the United Kingdom shall have to register for tax in each of the EU countries. Alternatively, they can apply to be part of the non-MOSS scheme through registering for tax in the EU. Any country outside the EU that was using UK moss registration shall have to register for MOSS again in the UK and register also in the UK separately.
It shall be necessary for any business that is registered for tax in an EU country where they do not reside to appoint a fiscal representative. This shall raise compliance costs, since the fiscal representative has to be paid. Besides, a bank guarantee has also to be provided since the representative shall be jointly liable with the business for any tax debts.
To move goods between the UK and EU, businesses will need to have two EORI numbers. You will not be able to do import/export business without these numbers.
It shall still be necessary to make custom declarations whenever you are importing and exporting goods. However, you shall now need to make separate declarations for each transaction.
The impact of Brexit has affected businesses differently, based on which industry you are in and your supply chain. That is why it is important that you understand how this change shall affect your business. If you require further help, hire a professional to help you understand and comply with the new tax terms.