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Will VAT See Changes After Brexit?

So far, it seems that Brexit will have an impact on almost all of the country's sectors energy, businesses, the property market, and so on. On top of that, it is also rumored that Brexit will have implications on VAT as well.

Even though, during a certain referendum, tariff and customs issues were discussed, little to no attention was paid to this particular issue – namely, VAT. Later on, people understood that VAT after Brexit could come with real difficulties, especially for Irish companies.

Let's take a closer look at how Brexit may affect and change VAT. 

VAT After No-Deal Brexit

Naturally, the UK will still have a VAT system after it leaves the European Union. However, the way the system works may be changed. At the moment, the government wants to keep the procedures related to VAT similar to what they are right now but we can't be 100% sure that they will be able to do so.

First of all, all businesses will have to register for the non-EU scheme of the Mini One Stop Shop (MOSS) portal. The latter will no longer be directly available outside of the UK if Brexit happens with no deal.

Therefore, as the VAT reclaim procedures of the EU, as well as the EU limits with interest, will no longer be available to the UK, the country will have to use the 13th Directive foreign VAT reclaim procedure.

Companies and VAT

Given the aforementioned, it is very likely that companies will use a tax accountant to assist them with the VAT, as the latter will be harder to manage. They’ll have to come up with a VAT calculator that would replace the EU VAT procedures.

On top of that, the triangulation simplification scheme of the EU will also be taken away from the UK-established companies. This scheme prevents middlemen from registering and accounting for VAT all over the European Union. To add or remove VAT from an invoice use this VAT calculator.

Transportation of Goods

If the UK leaves the EU without a deal, then the LVCR will also go away. The lack of his low-value consignment relief means that any goods worth below 135 pounds that are sent into the UK will experience import VAT.

As such, overseas businesses will have to charge VAT at the purchase point, as well as register with a digital service to account for due VAT.

General Changes

Overall, businesses that are established in the UK will have to register themselves via a resident fiscal representative for VAT in the EU member states.

On the other hand, when it comes to services, the use and enjoyment criterion will apply to those services from and to the UK and, moreover, any reverse charges may no longer have to be applied.

Still, the UK will be obligated to register and account for VAT that if the rendered services are labeled as being enjoyed locally and effectively used.

The Bottom Line

Even though it will be a difficult change, the UK is going to eventually adapt to the entire change of system.

In short, once the UK leaves the EU, it will no longer be subject to the laws of the European Union that guide VAT. Keep in mind that those laws also make VAT rather forgiving for businesses that import and export goods.

Therefore, once Brexit happens, companies and businesses may have to pay a bit more to maintain their same flow of operations for example or even the same profit.