Value-added tips on post-Brexit VAT

Posted: Tue 23rd Mar 2021
You'll appreciate that getting your VAT right saves unexpected costly surprises later and ensures your pricing is correct from the beginning. Here are the main points to understand to get you started:
Selling goods from GB to the EU
Firstly, get a GB EORI number (easy to do) and then identify your customer type as below:
Is the customer VAT registered in their country? YES
UK VAT isn't charged - zero-rated supply
Arrange for your EU business customer to account for EU VAT
Your EU business customer will pay EU import VAT, and charge local EU VAT, so there is no net EU VAT cost to your EU customer
Your invoice must show your customer's EU VAT number
Obtain proof that the goods left the UK
Include net sale in box six of your VAT return
Is the customer VAT registered in their country? NO
UK VAT isn't charged - zero-rated supply. Local EU VAT is due
Who pays local EU VAT is driven by who 'imports' the goods, i.e. the 'importer of record' as determined by your terms and conditions
In the case of Delivery Duty Paid (DDP) you'll be the importer of record. This means you're likely to have to pay local EU VAT. If so, obtain an EU EORI
Until 1 July 2021, consignments under €22 are VAT and duty free
Otherwise, you're required to register for VAT and account for local VAT on the sale. This might give rise to multiple VAT registrations across the EU. We're hearing that freight forwarders and agents are offering this service, which despite its cost might prove the best option for some small businesses
From 1 July 2021, for consignments of less than €150, a new optional non-union IOSS (Import One Stop Shop) will be introduced allowing a VAT submission to report and pay EU quarterly VAT country-by-country through one EU country's registration, e.g. Ireland
Instead of DDP, your sale might be Delivered At Place (DAP), which means your customer is the importer. We're seeing a lot of small businesses going for DAP even though this might not be the best customer experience, so you may want to consider whether this will affect your ability to get repeat business
Obtain proof that the goods left the UK
Include net sale in box six of the VAT return
Purchasing goods from EU to GB
Firstly, get a GB EORI number (easy to do) and then identify your type of import as below:
For consignment values under £135:
Are you VAT registered? YES
Provide your supplier with your VAT number
UK supply VAT is due, but account for import and export VAT on your VAT return, so there's usually no net VAT cost - known as a reverse charge
Complete boxes one, four and seven of your VAT return
If the goods are stored in the UK, the overseas seller raises a UK VAT invoice as usual
NO
UK supply VAT is charged based on the price you pay and is collected at point-of-sale
Your supplier needs to register for UK VAT and raise a VAT invoice
For consignment values over £135:
Are you VAT registered? YES
Provide your supplier with your VAT number
UK import VAT is due along with any customs duty
This can be settled through postponed VAT accounting (PVA) to help with cashflow. Inform whoever completes the import declaration so VAT isn't added at import
Complete boxes one, four and seven of your VAT return
If the goods are stored in the UK, the overseas seller raises a UK VAT invoice as usual
NO
UK import VAT is due along with any customs duty
Your supplier should register and settle the UK VAT
Alternatively, you could agree to pay the UK VAT
Take your time to get used to these rules and exactly which ones apply to you. In all likelihood, it'll be a lot easier to pay a freight forwarder or customs agent to deal with the associated administration for you. Ensure you build in extra costs to your margins, so your business remains sustainable.
Please note: these rules are still changing so always check the details at the time.