After two years of hard-fought and sometimes tumultuous negotiations, the Brexit deal has finally been agreed between the EU and the United Kingdom. Allowing for businesses to finally brief a slight sigh of relief but at the time preparing for them to get used to changes that will be coming their way. There would be too many to discuss in one blog however today we’re going to focus especially on what VAT changes we’re likely to see coming our way on the back of this deal.
Well as soon as the deal was done changes from VAT came into effect from January 1st. With most of the domestic VAT rules here within the UK remaining the same. However, some of the major changes include:-
- VAT rules that applied historically to non-EU countries for imports now apply to imports from countries within the EU. However, the government has made this transition easier by introducing ‘postponed accounting’. This essentially means that if you’re a UK VAT registered business you can account for the VAT charged on imports on your VAT return annually rather than having to pay the import there and then. This relaxation initiative of ‘postponed accounting’ has also been extended to cover non-EU countries.
- Except for VAT on imports that are exempt at the moment through postponed accounting any other duties or fees will still have to be paid which includes custom declarations. However, businesses do have the option to defer these payments onto a scheme where you make the repayments monthly through a ‘duty deferment account’. If you want to set up such an account you would need to register with HMRC as such and also provide a bank guarantee.
- From January 1st this year, VAT on imports that have a value of £135 or less will be collected at the point of sale whether online or abroad rather than when they are being imported. This means that VAT is payable on your export VAT rather than import VAT. Online marketplaces that sell products from the EU and non-EU countries importing into the UK are responsible themselves for collecting the VAT.
- Sales from business to business will also be subject to VAT for transactions that are less than £135. However, a reverse charge can be initiated if the customer is a business customer and they provide you with their registration number or vice versa.
If you want some more clarification on how the new rules affect your business and how you can plan going forward get in touch with a member of our team here at D&K Accounting.