The Brexit deadline is fast approaching and each day seems to bring new speculation on whether the UK and the EU will actually come to an agreement or not. As it stands, both sides are calling on the other to compromise, and neither side seem particularly optimistic about the prospect of a deal being reached. Regardless, the government have still released a wide range of support and guidance on the implementation of VAT post-Brexit when it comes to goods and imports. What has been less clear, however, is the implementation of VAT on services. This article will provide an update on what we know so far, as well as provide some advice on how to prepare your business for Brexit. For advice on VAT on goods, please take a look at our other articles here.
Services VAT on Business-To-Business Supplies
It will come as welcomed news to those participate in cross-border B2B services selling that there is likely to be very little change to the current rules on regarding services VAT. Services purchased from outside the UK and received in the UK are still liable to the reverse charge as they are now. Following Brexit the supply will still be deemed to take place in that country, because that is the current rule for supplies of services to persons outside the EU.
It is also worth noting that the need to complete EC Sales Lists ends on the 31st of December 2020.
Also, there are some services that will require UK businesses to register for VAT in other EU member states; these services include services connected with immovable property and admission to events.
Services VAT On Business-To-Consumer Services After Brexit
The rules are slightly trickier when it comes to Services VAT on B2C transactions. Services provided to EU consumers from the UK after 31 December 2020 will be zero-rated. As the place of supply under EU law is the UK, they should not be VATable in the country in which the customer lives either. Accordingly, there will be no requirement to register for VAT in that country.
Thus, the general rule is that the tax should be paid to where the supplier is located.
However, in the case of digital services, this shifts and the tax is instead owed to the place of the consumer.
In the case of services supplied from EU countries to the UK, the reverse charge régime will continue to apply in the same way as it does at present for supplies of services from businesses outside the EU, for example from the USA, India or Australia.
In the case of Northern Ireland, Services are excluded from the Northern Ireland Protocol, so sales of services between Northern Ireland and the Ireland/EU from 1 January 2021 will be treated like Third Country supplies.
Again, this represents very little change to services VAT which will come as a relief to suppliers. Further, supplies of services between Northern Ireland and the UK will continue to be considered domestic supplies. You can read more about that in our previous article here.
The general message is there is going to be very little change to the current VAT rules. However, it will certainly be worth keeping an eye on developments with the Brexit negotiations in turmoil and the government still yet to be completely clear on the rules regarding VAT on services.
If you are a business who participates in cross border e-commerce, we would be more than happy to help you file your VAT returns, and help you comply with VAT in case your account faces any issues. At J&P, helping your business is our passion, and we understand that companies across the UK are at risk now more than ever. We are here to support you through the Coronavirus crisis and Brexit, so please do not hesitate to give us a call on 0161 637 1080 or send an e-mail to firstname.lastname@example.org.