UK VAT Changes

VAT is charged on most goods and services sold within the UK and the EU. VAT is paid by businesses when they import goods into the UK. As a result of Brexit, VAT registration requirement can arise in a number of ways and many new changes have and are still currently being implemented.

1^st Jan 2021

From 1 Jan 2021, new EU laws were implemented within importing and exporting. Customs duty costs for the UK and EU origin goods have now been removed and VAT imported goods up to £135 is now collected at the point of sale, rather than the point of importation. This means that the UK supply the VAT rather than import VAT.

Conversely, UK registered VAT businesses can still operate on a zero-rate sales of goods to the EU. Therefore, EU member states will treat goods entering from the UK the same as goods entering from non-EU countries. Meaning importation VAT and tariff charges are only due when the goods arrive in the EU.

Goods imported from the Great Britain to Northern Ireland need to trade under the Northern Ireland protocol, which states that NI maintains alignment on some administrative processes within the EU VAT rules.

For more information on HMRC guidance on NI protocol visit Gov.uk.

1^st Feb 2021

If you had previously deferred your tax VAT payments between 20^th March 2020 and 30^th June 2020, you are eligible for repayments from the government in instalments from henceforth till Jan 2022.

UK businesses can also reclaim VAT from EU member states, however this will need to be done using the current electronic system.

1^st March 2021

HMRC have imposed a domestic reverse charge in the construction sectors, whereby the receipt rather than the suppler is now applicable for the VAT on construction services through its VAT return instead of paying the VAT amount to the supplier. It is stated that this new system will have an impact on the pecuniary resources and accounting management of construction businesses.

There are some exceptions for specified services where a recipient makes an ongoing supply of the particular specified service.

1^st April 2021

Previously there has been a split between accounting systems and VAT returns due to outdated systems and software, making it harder for taxpayers to access digital tax. However, starting from 1^st April 2021 there has been developments of new software that joins tax VAT. The software makes it easier to transport VAT information from one software to another.

1^st July 2021

The EU has reformed how e-commerce VAT is accounted for on cross-border business to consumer supplies. Since December and the final Brexit deal, significant changes have been introduced on VAT duty goods that are shipped and sold to consumers in the EU from non-EU countries. The new changes will mainly effect e-commerce transactions.

Goods sold to EU customers valued higher €150 + will require a new VAT procedure, meaning many suppliers will now have to register and account for VAT in EU countries. Additionally, the VAT exemption of imported goods of more than €22 has been removed.

There are still more future changes that are being planned. As of 31^st March 2022, the 5% reduction in hospitality and leisure is said to come to an end and will increase up to 12.5% then a further 20% from 1^st April 2022.

Written by Abi Raji

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