VAT – post-Brexit transition updates

The VAT landscape for businesses trading with the EU has changed significantly since the UK left the single market. From the Import One Stop Shop (IOSS) to the requirements for fiscal representation in certain EU states, the rules are complex.

Ensuring your systems are correctly capturing the necessary data and that you are using the correct VAT treatments for your exports and imports is vital for avoiding costly errors and delays at the border border-border.

The Import One Stop Shop (IOSS)

For UK businesses selling goods to consumers in the EU (B2C), the IOSS scheme can simplify VAT compliance for consignments valued at €150 or less. By registering for IOSS in one EU member state, you can collect the VAT at the point of sale and declare it on a single monthly return, avoiding the need for the customer to pay VAT and handling fees upon delivery. However, using the scheme requires careful setup and data management.

B2B sales and postponed VAT accounting

For business-to-business (B2B) sales, the rules are different. Goods exported to the EU are zero-rated for UK VAT, but the EU customer must account for import VAT in their own country. Conversely, for goods imported into the UK, Postponed VAT Accounting (PVA) allows UK VAT-registered businesses to declare and recover import VAT on the same VAT return, providing a significant cash flow advantage compared to paying the VAT at the border border-border.

Services and the 'place of supply'

The rules for supplying services to the EU also changed post-Brexit. The 'place of supply' rules determine where the VAT is due. For B2B services, the supply is generally treated as taking place where the customer belongs, meaning no UK VAT is charged. However, there are complex exceptions for certain services, such as digital services, land-related services, and events, which may require registration in the EU member state where the service is performed.