During June 2018, the European Union (EU) and the United Kingdom (UK) published a joint statement on the progress of negotiations relating to the UK’s withdrawal from the EU planned for March 2019, the full statement can be found here.
In the joint statement, it confirms that the UK will remain in the EU VAT regime until the end of the 19-month Brexit transition period, which is scheduled to end on 31 December 2020.
In effect, this means that the EU VAT Directive rules on cross-border transactions will still apply in the UK until at least the end of the transition period in 2020. This will mean that:
- Intra-community business-to-business sales (EC sales) from the UK to other EU countries will remain zero-rated – This is subject to the same conditions already in place, which requires the supplier to obtain their EU business customers VAT registration number in another member state and that the goods leave the UK for delivery in another EU country.
- Distance selling rules/thresholds remain in place for intra-community business-to-consumer sales – Distance selling rules allow suppliers selling from the UK to consumers in another EU country, to charge UK VAT up until certain thresholds in the customer’s country are met. Once the threshold is met, the supplier has an obligation to VAT register in that country and charge VAT locally.
- Cross border EU VAT Refunds (8th Directive refunds) can still be made to other EU countries by UK businesses – This allows UK businesses who incur business expenses in other EU countries, to claim the VAT element of the expenses back from the relevant tax authorities in the other EU
- The UK Mini One Stop Shop (MOSS) return facility for reporting VAT on electronic services made to other member states, will remain in place – This allows businesses who are selling electronic services (including e-books) to consumers in other EU member states, to report/pay the VAT collected to the UK tax authorities. Rather than having to VAT register in their customer’s country to charge/pay VAT there.