Will UK VAT Rise after Brexit (hits)?

First of all, it is worth mentioning that – reportedly – domestic VAT will not be affected once the UK leaves the EU – no matter if this happens with or without a deal. However, a lot of people are concerned about the implications that Brexit will have on business VAT – especially those who run a small- to medium-sized business.

Sources suggest that UK-based companies will have to face a huge new VAT burden after Brexit finally hits. In fact, given the fact that the companies will have to rely on the 13th Directive Scheme for non-EU members, they may have to make use of an online VAT calculator to come up with how much they have to pay on import and export.

The No-Deal Scenario

Naturally, the no-deal scenario is the worst thing that could happen to the UK businesses – mainly because anything related to VAT and customs will be in effect immediately after the UK withdraws from the EU officially.

The main things that will be affected are the import and export of goods between the UK companies and the EU-based companies. On top of that, the UK will also no longer be able to interact with the systems part of the EU VAT IT – such as the MOSS. 

Importing Goods from the EU

Here’s what will happen with VAT, in terms of importing goods from the EU, after Brexit.

• Goods imported in the UK will be subject to postponed accounting for import VAT. This implies that the UK VAT-registered businesses that import goods into the UK will be able to account for the import VAT when it comes to their VAT return. This change will affect imports from both EU and non-EU countries.
• When it comes to goods sent into the UK as parcels, 135 pounds is the key value here. If parcels are valued up to 135 pounds, then VAT will be collected from the business that sends the parcel in the UK. On the other hand, if parcels are worth more than 135 pounds, VAT will still be collected from the UK-based recipients, complying with the procedures for non-EU countries.
• After Brexit, vehicles that one brings into the UK from any member states of the EU will be subject to import VAT. Businesses will still have to use NOVA in order to verify that the VAT is properly paid on the vehicles that they import. 

Exporting Goods to the EU

Now, let’s take a look at how VAT will be affected when it comes to exporting goods to the EU.

• In the case of a no-deal Brexit, UK businesses will no longer enjoy distance selling arrangements. On the other hand, they will be able to zero-rate sales of goods to any EU customers.
• When it comes to exporting goods to EU businesses, UK businesses will still be able to zero-rate sales of goods to the businesses that are part of the EU, but they will not have to complete the EC sales lists. 
• UK businesses that sell their own goods in EU member states to customers of that country will be able to proceed with the sale of those goods but in line with the Rest of the World rules that the EU has in place. 

The Bottom Line

In short, it goes without saying that business VAT will rise after Brexit. On the other hand, even if it doesn’t rise substantially, there will be enough changes that will cause headaches for business owners.

Still, given that entrepreneurs and analysts were warning people about the Brexit implications on VAT one year ago, it is almost certain that businesses will have to deal with a powerful hit to their cash-flow after Brexit happens!