Starting a new business? Get 40% off our accountancy services for 3 months! 😎
The end of the Brexit transition period means there are changes to VAT rules for businesses trading with the EU. Some of these changes might affect your business, even if you’re not VAT registered. You can also use the government’s Brexit transition website to see what you need to do next.
The changes affect the processes and VAT for:
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.
The changes to VAT and excise handling might affect your business, even if you’re not VAT-registered.
Some VAT processes and procedures are now different. If your business imports in to the UK, then you need to be aware of:
Businesses importing goods from the EU will now pay import VAT when their shipment reaches the UK border. This already happens for imports from the rest of the world. Since the end of the Brexit transition period, it’s also the same for imports from the EU.
To help UK businesses manage the change, the UK government are introducing postponed accounting. This changes the way the businesses account for and pay import VAT.
The responsibility for collecting VAT on imports with a low value also changed on 1st January 2021. Import tax is no longer due at the border on goods worth less than £135. That doesn’t mean there’s no VAT to pay.
UK businesses were able to reclaim VAT on EU purchases using their UK VAT return to HMRC. This will come to an end on 31st March 2021, and there aren’t any other arrangements in place.
As it stands, you won’t be able to reclaim VAT you pay to EU sellers after the end of March. Get those claims in!
The Brexit deal includes changes to processes and procedures for UK businesses which send goods to the EU.
These include:
There are VAT rules which affect businesses which supply services or make digital sales across the UK border.
This includes:
Since the end of the Brexit transition period some of VAT rules on services and digital sales are different, including changes to VAT MOSS. This affects where certain types of seller must register for VAT, and the process for charging it.
Learn more about our online accounting services. Call 020 3355 4047 to talk to one of the team, or grab a free instant quote online.
Subscribe to our newsletter to get accounting tips like this right to your inbox
This month we spoke to Sean Bingham, Managing Director of Bingham Carbon Solutions Limited! Bingham Carbon Solutions Limited |Â LinkedIn Hey Sean! Tell…
Read MoreRead our guide to UK tax rates and thresholds for sole traders, limited companies, partners and partnerships, employers, and other businesses. UK…
Read MoreIn general, you don’t need to worry about paying taxes on your Christmas presents. You can unwrap your gifts in peace without…
Read MoreThe number of monthly transactions you have entered based on your turnover seem high. A transaction is one bookkeeping entry such as a sale, purchase, payment or receipt. Are you sure this is correct?
Please contact our sales team if you’re unsure
It is unlikely you will need this service, unless you are voluntarily registered for VAT.
Are you sure this is correct?
Call us on 020 3355 4047 if you’re not sure.
You will receive our bookkeeping software Pandle for free, as part of your package.
You can use this to complete your own bookkeeping, or we can provide a quote to complete your bookkeeping for you.
Please select and option below:
Call us on 020 3355 4047 if you’re not sure.