Many businesses are struggling with the VAT regime in place since Brexit, especially when it comes to exporting goods to the EU. We address some of the common misunderstandings.
Provided you have proof of postage or shipment, goods exported from the UK to the EU are zero-rated. However, as businesses are finding out, problems arise because the VAT implications of importing into the EU must also be factored in.
Most businesses will need to accept responsibility for the EU VAT and therefore export on delivered duty paid terms. This adds significant cost unless you register for VAT in each country exported to so that VAT can be recovered. However, the introduction of the EU’s one stop shop from 1 July 2021 will mean just one EU member state VAT registration will be required for consignments of less than 150 Euros. Many businesses are setting up an EU base to get round the worst of the problems, which the government has appeared to encourage. The Netherlands, with English spoken by most, is a popular choice, and Dutch logistics and warehousing companies are seeing high demand for their services.
The introduction of postponed import VAT accounting means that, in most cases, import VAT does not need to be paid upfront. Instead import VAT is accounted for as a reverse charge on the VAT return. You or your agent simply need to indicate on the customs declaration that postponed accounting will be used.
VAT on business to business services remains essentially the same, with the place of supply generally where the recipient belongs. There is no longer any need to submit EC sales lists for goods exported or services supplied to the EU.
HMRC guidance on VAT on exports can be found here.