Collaborative Post

Businesses and VAT in a post-Brexit scenario


Most, if not all sources report that Brexit may hit the UK-based business so hard that they’ll even have to pay VAT upfront when they import goods. This will, undoubtedly, impact both companies and businesses on a high-level, especially their cash-flow-related operations.

At the moment, while the UK is still in the EU, goods imported from the EU are seen as acquisitions when regarding tax purposes. This means that no VAT is paid until the goods are sold to a final customer. 

Naturally, if the UK leaves the EU, you will need a new VAT calculator, as it is expected to increase since the government doesn’t have a sound strategy for tax. 

The VAT on a No-Deal Brexit

Even though the UK government wants to keep the upcoming VAT procedures as close as possible to the EU VAT system, changes are bound to hit the country’s businesses.

Photo by John Cameron on Unsplash
  • VAT for Goods Imported into the UK

As such, after Brexit happens, postponed accounting for import VAT will be introduced on goods brought into the UK. The businesses that are registered in the UK can account for import VAT on their return and not pay import VAT. 

This postponed accounting will affect imports from both non-EU and EU countries. It is basically one of the main tax systems that the government has come up with so far. 

  • VAT for Goods as Parcels

The VAT will be payable for overseas businesses that send goods into the UK on/ as parcels. If the goods are worth more than 135 pounds, the VAT will be collected from the UK-based recipients. 

This is how every other non-EU country is currently treated. 

  • VAT for Goods Exported to EU Consumers

UK businesses will no longer be able to enjoy distance selling arrangements. On top of that, businesses will also be able to zero-rate the sales of goods to consumers located in the EU.

On top of that, the UK will no longer be a part of the VAT IT systems that are EU-wide only – such as the Mini One Stop Shop. 

VAT Refund

Obviously, the UK-based businesses will still be able to claim VAT refunds from any of the EU member states. However, the UK will have to comply with the processes and procedures meant for non-EU businesses. 

On the other hand, you may also register your business for VAT in one of the countries that you usually trade with – if that country is part of the EU. 

In any case, you will have to make use of the 13th Directive scheme and not of the 8th Directive scheme.

The Bottom Line

It goes without saying that businesses will have it much harder if the UK leaves the EU without a deal. UK-based businesses will have to adapt to the new changes and decide which part of their business is more important.

We say so because there may be some UK companies that will stop trading with certain EU countries, depending on the VAT that they’ll have to pay after Brexit. Moreover, if VAT will have to be paid upfront, then businesses may end up losing money if their products are not sold.