As the UK will now be leaving the EU, there have been many changes to VAT rates. You can find all information on how this will impact your business below.
Refunds Of VAT On Overseas Expenses
Any VAT on business expenses incurred in another EU country up to the 31st December 2021 can now be reclaimed through the HMRC’s online VAT service. The deadline for this is 11pm on the 31st March 2021; you will also be able to view previous refund claims and make amendments until this date.
However, it will be essential to keep in mind that as the UK is now leaving the EU, you will no longer be able to reclaim any overseas VAT incurred after the 31st December 2020. Instead, any businesses based on the UK will have to reclaim VAT by submitting claims directly to the tax authority of the country in question. Typically, these claims will need to be submitted on paper and in the country’s language by their own refund claim deadline.
VAT On Low-Value Imports
From the 1st January 2021, there will be many new changes for companies who import or export goods. This is because there will no longer be free movement of goods between the UK and EU; any existing rules will be stopped from 11pm on the 31st December 2020.
If your business purchases low-value goods from abroad which cost less than £135 per parcel you need to factor in the cost of UK VAT from 2021. With the current rules, many low-value goods enter the UK with no VAT as they are not declared by overseas sellers. However, from the 1st January 2021, all goods entering Great Britain must be subject to VAT, so you should speak with your suppliers in advance to see how they plan to tackle this. They will take one of the following options:
- Sell as a business to business transaction with no VAT added
- Register for VATin the UK and charge UK rates
- Sell through an online marketplace which is registered to UK VAT rates
VAT In International Services
If you are a UK-based business which supplies your services to individuals in other EU countries, then you will currently be charging UK VAT rates. However, from the 1st January 2021, because the UK will no longer be a member of the EU, the services supplied will no longer be subject to UK VAT, and for many, no VAT will be applied.
Services supplied between business across international borders have been treated as outside the VAT scope for many years; however, the customer will always have to show proof that they are a business. Your EU suppliers may try to charge VAT to your business from 2021 stating that your UK-issued VAT number is not valid, but this is incorrect. Your UK VAT number will remain acceptable proof of your business status from 1st January 2021 and thereafter.