It can be difficult to write about Brexit as there seems to be a Brexit fatigue syndrome creeping in, however, the deal announced on 17 October 2019 between the UK Government and the EU certainly made for interesting reading. 

If implemented, and who knows if it will or if the UK will remain in the EU temporarily till January 2019, it will create an odd situation where most but not all of the UK will have left the EU single market, but part of the UK – specifically Northern Ireland - will remain in the single market in limited circumstances. The limited circumstances are actually quite wide as they apply to VAT and excise rules for supplies of goods.  The EU Customs Code will apply to goods entering Northern Ireland and EU customs duties will apply to any goods entering Northern Ireland that risk entering the EU Single Market.

How this will operate in practice is not clear as yet and clearly could present difficulties for UK businesses that are established in Northern Ireland and sell goods to the UK (no longer in the EU) or the Republic of Ireland (in the EU).

Any checks, controls and duties required for goods entering Northern Ireland from the rest of the UK will be conducted and administered by the UK authorities subject to appropriate EU supervisory and enforcement mechanisms.

The main issue to note though if the deal is agreed by the UK parliament or not is that the UK will likely exit the EU at some point in the near future and UK businesses need to plan for this eventuality. For example:

  • if you sell to EC consumers and are VAT registered in other EC countries post exiting the EU your distance sales VAT registration will become invalid - have you considered who will deal with import VAT and duty, your business or your customer?
  • if you sell to business customers in other EC member states will they act as importer of record and recover the import VAT, or will they expect your business to do so which could result in your requiring VAT registration in other EC countries?
  • Does your business trade with businesses in the EC and use a VAT accounting method that can only be used between EC VAT registered businesses such as the second-hand margin scheme?

The other significant change is that the agreement now reflects the UK government’s aspiration to trade with the EU with zero tariffs and quotas between the EU and the UK.

If you or your client trades with the EU and requires practical advice on how to ensure that their business is prepared for the significant changes to how it will account for VAT post exiting the EU, please contact out helpline for further advice.

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