On 1st January 2021, the UK left the EU and subsequently there are a number of changes happening to how VAT will be paid. The next date for the business diary is 1st July 2021, when EU VAT legislation changes will see the process being overhauled again to help with reducing VAT fraud, which will subsequently impact UK exporters as well as the EU and the rest of the world.
Being forewarned is to be forearmed, so what do you need to know?
What constitutes as an ‘UK exporter’?
If you are an UK company and you sell goods to the EU, these are now seen as exports from the UK. Therefore, invoices will be ‘zero-rated’ for VAT purposes.
Selling to a VAT Registered EU Business
If a business customer is VAT registered based in the EU, they will need to account for their equivalent of VAT on the import of the goods from the UK using the reverse charge mechanism. As an UK exporter you will need to maintain records of evidence (proof of export) that the goods left the UK.
Selling to a non-VAT Registered Business or End Customer
If you are selling to a non-VAT registered business or to an end customer (B2C) then the EU distance selling rules no longer apply to UK businesses. From 1st July the EU has implied that it will impose new regulations surrounding VAT. One of the changes will be the abolishment of the Low Value Consignment Relief (LVCR).
One Stop Shop (OSS) & Import One Stop Shop (IOSS)
The OSS and IOSS will be introduced by the EU on 1st July and will be set up as an optional scheme.
The OSS is an online portal for businesses by which non-domestic tax can be reported and paid, for supplies and services and online intra-community distance sales of goods to consumers across the UK.
Intra-community distance sales are where a VATable supply of goods is made from one EU country to another consumer in a different EU country.
There are two versions of OSS: Union OSS and non-Union OSS. The non-Union OSS is the one applicable to UK businesses as they are established outside of the EU and can be used to report VAT on sales of service to EU business customers only.
The IOSS is also an online portal to be used when selling to non-VAT registered businesses and B2C. It will only apply to goods where the CIF value (goods + insurance + freight) is less than €150. An Intermediary, similar to a fiscal representative will need to be appointed and will need to be registered as a user on IOSS.
- As a UK business you will charge VAT at the point of sale (using the rate applicable in the customers’ country).
- An invoice will be produced to provide evidence that the local VAT and duties have been paid.
- As a UK business you will declare and pay the VAT via the Intermediary to the applicable member state via the IOSS in a single VAT return.
For goods sold over €150, UK businesses can simply zero rate and the customer pays the import VAT.
Ensuring that you have the correct compatible accounts software is paramount as you will need to be able to determine real-time VAT Rates. The changes in legislation and regulations can seem daunting but the experienced team at Advantage Services are able to offer advice on software solutions as well as training on the new changes in Sage 50 Accounts.
The new Post Brexit training course is available face-to-face or remotely and will cover the following content;
- Northern Ireland Protocol
- Sale of Goods – UK (Including Northern Ireland)
- Sale of Goods – Rest of the world (Including EU)
- Sale of Services – UK (Including Northern Ireland)
- Sale of Services – Rest of the world (Including EU)
- Sale of Goods – To Northern Ireland and EU under EU e-commerce from 1 July 2021
- Purchase of Goods – UK
- Purchase of Goods – Northern Ireland Protocol applies
- Purchase of Goods – Below Import Reverse Charge Threshold of £135/€150
- Changes from 1 July 2021
- Purchase of Goods – Postponed VAT Accounting
- Purchase of Goods – Non-Postponed VAT
- Online marketplaces and imports
- Online marketplaces and supplies within the EU
- How OSS/IOSS works in Sage Accounts
- To set up new tax codes
- To install and run the Tax Analysis report
- Making a VAT payment to HMRC or Revenue
- Purchase of Services – UK
- Purchase of Services – Rest of the World – Reverse Charge
For more information call 0330 335 0011 or email email@example.com.