In most cases, the new VAT rules came into force on
1st January 2021.
The changes affect the processes and VAT for:
Receiving goods from the EU (importing).
Sending goods to the EU (exporting).
Reclaiming VAT on EU purchases.
Providing services or digital items across the UK/EU border.
What does VAT have to do with Brexit?
To help you understand what Brexit means for VAT, it’s useful to understand how VAT normally works. Watch our introductory video to learn about VAT, or carry on reading below.
If a business registers for VAT, it charges VAT on any taxable sales that it makes. This usually means adding the cost of the VAT on to the customer’s bill.
The customer pays what they owe to the business, including the VAT charge. The business effectively acts as a tax collector, and is responsible for paying the VAT it collects on to HMRC.
It’s a bit more complicated when the seller and the customer are in different countries. This is because of the way that VAT is usually charged on sales as well as imports, which can mean paying two lots of VAT.
To make easier and to encourage trade, EU VAT rules allow EU members to use special rates and handling processes to account for VAT.
Since the end of the Brexit transition period the UK is no longer a member of the EU, or part of the EU VAT area.
This means that goods crossing the UK/EU border are now imports or exports.
The changes to VAT and excise handling might affect your business, even if you’re not VAT-registered.
Receiving goods from the EU (importing) after Brexit
Some VAT processes and procedures are now different. If your business imports in to the UK, then you need to be aware of: