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Shaw Gibbs and BSKP joint Brexit VAT seminar - news article image

Shaw Gibbs and BSKP joint Brexit VAT seminar

18 Mar 2021

9 minute read

I recently joined forces with German DFK member firm BSKP to deliver a seminar to help clients plan for Brexit. 

The Brexit seminar was delivered by Thomas Lechera from the BSKP who provide: tax, legal, accountancy and corporate consulting services from their 11 offices throughout Germany.

Both BSKP and Shaw Gibbs are members of DFK, an international association, a worldwide association of independent accounting, tax and business advisory firms who have been advising clients with interests in more than one country for more than 45 years.

A summary of what I covered follows.

Supply of services within the UK

The good news is that for business-to-business (B2B) supplies of services between UK and EU companies there is no change to the place of supply rules including reverse charges. Businesses should account for VAT on such supplies as current.

In relation to business-to-consumer (B2C) supplies, the situation is slightly more complex. This is because at the moment there are multiple place of supply rules for supplies to consumers. Generally, where a business makes such supplies the VAT is due in the country where the supplier is located, however, there are many exceptions to the general rule relating to cultural, artistic, sporting, scientific, educational or entertainment services whereby the VAT is due where these services have been performed.

The special exceptions for the B2C rules will not change and will still be taxed within the member state the services were performed meaning potential VAT registration may still be potentially necessary. If you are involved in making such supply of services within the UK, do get in touch as per our contact details below as there are potential UK VAT registration consequences.

For supply of digital services all such providers are subject to some major changes over the next 12 months which should be acted upon as soon as possible to avoid any future VAT compliance issues. Non-UK businesses that are at present supplying digital services to UK consumers via the previous MOSS scheme are now required to separately register for VAT in the UK for their supplies to UK consumers following Brexit.

Supply of goods within the UK

For Business-to-Business (B2B) supplies, it is usually the customer who takes care of the VAT reporting obligations on import. We would advise businesses in this situation to clarify such arrangements with your UK customer as to avoid any potential VAT issues arising post transitional period. More specifically, the following such supplies should be noted as the VAT consequences are substantial.

Direct sales to UK business customers (B2B consignment less than GBP135) where goods are located outside the UK at the point of sale.

The overseas seller may avoid the need to VAT register within the UK and charge UK VAT if it holds the UK VAT registration number of the business customer. In this situation, a VAT invoice should be issued stating that ‘VAT is to be accounted for by the UK business customer by way of a reverse charge (this replaces acquisition VAT)’.

Direct sales to UK business customers (B2B consignment more than GBP135) where goods are located outside the UK at the point of sale

The non-UK based supplier is able to avoid UK VAT registration and no need to account for UK VAT where the GB or XI (Northern Ireland) EORI number of the business customer is identified in the customs declaration as the consignee i.e. the ‘importer on record’. In this situation, a VAT invoice again should be issued with the business customer’s VAT number and a statement that ‘VAT is to be accounted by the business customer by way of a reverse charge’. Where the UK customer does not act as the consignee then the overseas seller will be required to VAT register within the UK most likely. 

For Business-to-Consumer (B2C) supplies of goods it becomes more complex in terms of avoiding any UK VAT registration obligations as the distance selling regime previously used will be unavailable for EU businesses.

B2C distance sales post 1st January 2021 - where goods are located outside the UK 

From 1 January 2021, the VAT treatment of sales of goods by non-UK established sellers (i.e. sellers established abroad for example, in the EU etc) will be treated as follows:

Direct sales to UK consumers (B2C sales consignment less than GBP135):

  • Non-UK established sellers must now charge UK VAT on such UK sales at the point of sale and have ongoing VAT compliance obligations (VAT invoicing, VAT returns, VAT payments). 
  • As there is no minimum VAT registration threshold for non-UK established sellers. VAT registration will be mandatory for non-UK established sellers from 1 January 2021.

Sales by non-UK established sellers made via Online Market Places (OMP’s) - where the goods are located within the UK

Sales to UK consumers via an OMP (B2C via OMP consignment of any value) 


In this instance, the non-UK established seller will be deemed to have made a B2B zero-rated supply to an OMP, so no need to VAT register within the UK. However, the non-UK established seller will be eligible to register for VAT to recover any import VAT incurred in bringing the goods to the UK but will not be responsible for accounting for VAT on the sale in its VAT return. The OMP will also be deemed to have made a B2C supply to the customer and be responsible for collection and payment of VAT. The OMP will be required to register for VAT (if it is not already registered) and issue a VAT invoice to the customer.

Sales to UK business customers via an OMP (B2B via OMP consignment of any value)

In this instance, the overseas seller is liable to account for VAT and issue a VAT invoice where the UK customer provides their VAT number. If the VAT registration number of the UK business customer is not available, the sale will then be treated as a B2C via OMP supply (please see above). 

Sales made via OMPs (goods outside the UK at the time of sale)

Sales to UK consumers via an OMP (B2C via OMP consignment less than GBP135)

In this instance, a seller will be deemed to have made a B2B supply to the OMP which would be classed as ‘outside the scope of UK VAT’. The result would be that there will not be any UK VAT accounting obligations for the non-UK seller. Second, the OMP will be deemed to have made a B2C supply to the customer and be responsible for collection and payment of VAT, along with the requirement to issue a VAT invoice. 

Sales to UK business customer via an OMP (B2B via OMP consignment less than GBP135)

Again, the seller is deemed to have made a B2B supply to the OMP which is outside the scope of UK VAT. The good news is that again there will not be any UK VAT accounting obligations for the seller. Also, if a OMP holds the VAT registration number of the business customer, there will be a deemed B2B zero-rated supply by the OMP to the business customer. The OMP would not charge or collect any UK VAT, but will need to issue a VAT invoice noting that VAT will be accounted by the business customer by way of a reverse charge.

Postponed accounting

Following Brexit, all UK VAT registered businesses including non-established ones will be able to benefit from a new import VAT deferral procedure known as postponed accounting. This means that no UK import VAT is payable at the UK border and can be processed via the UK VAT return which greatly assists businesses with cash flow. 

Customs duty

When the recent trade deal between the EU and the UK was announced there was a lot of emphasis on the fact that there will be zero tariffs and no quotas applied on any trade which takes place between UK and EU businesses.

While it’s true that there are no tariffs on trade between the UK and EU, organisations should note that such free trade arrangements only apply where the goods originate in those locations i.e. within the UK or EU. Goods which originate from elsewhere may not fall within the parameters of the trade deal, which therefore means that organisations are potentially subject to positive rate of duties being applied upon importation of the goods into the UK.

As ‘Rules of origin’ is a complex area we would recommend professional advice is sought when assessing the ‘origin’ of goods, especially if the goods involved has come through various stages of manufacture in different countries. 

EU VAT refunds

The simplified procedure for reclaiming VAT incurred by non-UK businesses within the UK will be removed. This will now result in greater administration as after 1 January 2021, EU established businesses will need to follow the non-EU VAT refund procedures set out by the UK tax authority. If you are presented with such an issue, please do get in touch to discuss further.

When making supply of goods to the UK post 1st January 2021 the following practical actions should be undertaken:

Every business is different, and we welcome the opportunity to work with you to support your business with any UK VAT or accounting issues into 2021. If you require more information on any of the issues contained in this letter, please contact us to discuss how we can help ease any business issues that you may be experiencing.

Shaw Gibbs and BSKP joint Brexit VAT seminar - news article image

Author:

Asim Khan

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