HMRC guidance on no-deal Brexit VAT

As part of its no-deal Brexit planning, HMRC has released guidance regarding the VAT rules and processes around payments and reclaims if the UK leaves the EU with no deal. In particular, the guidance includes information concerning: claiming EU VAT refunds; checking a VAT number; using the non-Union VAT MOSS scheme for digital services after 29 March 2019.

More general guidance on no-deal VAT planning can be found on HMRC’s website.

Reclaiming EU VAT

The guidance makes it clear that if a business wishes to use the EU VAT refund electronic system to submit a VAT refund claim for 2018, this will need to be done by 5pm on 29 March 2019. Any claims after that time will not be sent to the relevant EU member state. It would be worth submitting these claims as soon as possible given the increasing risk of a no deal Brexit.

After 29 March 2019, VAT refunds must be claimed using the particular Member State’s processes for businesses based outside the EU, including any 2018 claims that are not submitted, and all claims relating to 2019. Again, businesses should consider starting to prepare by understanding the refund process for each EU Member State, for example, the deadlines, any requirement to supply a certificate of taxable status and the need to appoint a tax representative.

Supplies of digital services

Currently, UK businesses making B2C supplies of digital services (ie electronically supplied services, broadcasting or telecom services) into the EU, may use the EU VAT Mini One Stop Shop (MOSS) system. This online scheme allows EU businesses that sell digital services to consumers in other EU Member States to report and pay VAT via a single return and payment in their home Member State. From 01 January 2019, this has been subject to an annual threshold of £8,818 below which businesses are not required to register and account for VAT.

In the event of a no deal Brexit, UK businesses suppling digital services to EU customers will no longer be able to utilise the EU VAT MOSS scheme. Instead, UK businesses wishing to continue to use the simplified system will need to register for the VAT MOSS non-Union scheme in a Member State. Businesses which are currently registered in the UK with the EU VAT MOSS scheme will be automatically deregistered on 01 April 2019 and should register with the non-Union scheme by the tenth day of the month following the first sale after the UK leaves the EU. This means that affected businesses should register in a Member State with the non-Union scheme by 10 April 2019 if digital supplies are made between 29 and 31 March. Alternatively, a business can register in each EU Member State where sales are made.

Furthermore, it should be noted that there will be no threshold for supplies of digital services to consumers in EU member states. The £8,818 annual threshold for cross border sales of digital services to EU consumers will no longer apply.

Comment

Whilst the Government’s official position remains that it is confident that it will be able to reach agreement with the EU over the terms of the UK’s withdrawal from the EU, it would be prudent for all businesses to ensure that they are familiar with the VAT issues that will arise for their business in the event of a no-deal Brexit. In addition to the guidance released by HMRC, a number of SIs have been tabled to ensure that the VAT system continues to operate effectively in a number of affected areas, see “HMRC VAT no-deal Brexit planning”.

In addition, the EU Commission has also released information concerning actions to be taken be EU businesses in a no-deal scenario, see “Brexit preparedness: Commission intensifies “no-deal” customs preparedness outreach to EU businesses”.