Value-added tips on post-Brexit VAT

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

1. UK VAT isn't charged - zero-rated supply

2. Arrange for your EU business customer to account for EU VAT

3. 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

4. Your invoice must show your customer's EU VAT number

5. Obtain proof that the goods left the UK

6. Include net sale in box six of your VAT return

Is the customer VAT registered in their country? NO

1. UK VAT isn't charged - zero-rated supply. Local EU VAT is due

2. 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

3. 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

4. Until 1 July 2021, consignments under €22 are VAT and duty free

5. 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

6. 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

7. 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

8. Obtain proof that the goods left the UK

9. 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

1. Provide your supplier with your VAT number

2. 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

3. Complete boxes one, four and seven of your VAT return

4. If the goods are stored in the UK, the overseas seller raises a UK VAT invoice as usual

NO

1. UK supply VAT is charged based on the price you pay and is collected at point-of-sale

2. Your supplier needs to register for UK VAT and raise a VAT invoice

For consignment values over £135:

Are you VAT registered? YES

1. Provide your supplier with your VAT number

2. UK import VAT is due along with any customs duty

3. 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

4. Complete boxes one, four and seven of your VAT return

5. If the goods are stored in the UK, the overseas seller raises a UK VAT invoice as usual

NO

1. UK import VAT is due along with any customs duty

2. Your supplier should register and settle the UK VAT

3. 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.