VAT news and cases roundup: September 2018

HMRC issues guidance on Brexit no-deal

HMRC has issued a range of guidance notices informing the public and businesses of the implications of the UK leaving the EU without a formal withdrawal agreement. The government emphasises that this is unlikely given the progress of ongoing discussions.

One of the notices concerns VAT implications for businesses trading with the EU if there is no Brexit deal. Topics covered are:

Importing goods from the EU

  • The government will introduce a postponed import VAT regime so companies buying goods from the EU or other countries can avoid the cash flow problems of having to recover UK import VAT.
  • The current £15 low value consignment stock relief provided for small, imported packages will not be extended to goods coming from the EU.
  • For parcels over £135, a technology-based solution will allow VAT to be collected from the overseas business selling the goods into the UK. Overseas businesses will charge VAT at the point of purchase and will be expected to register with an HMRC digital service and account for VAT due.


Exporting goods to the EU

  • EU Member States will treat goods coming from the UK in the same way as from any other non-EU third-country. This means import VAT and customs tariffs would become due for the first time.
  • Distance selling VAT registration threshold relief will cease to apply in the event of no Brexit deal. This means many small UK e-commerce retailers would have to VAT register immediately for B2C goods trading into EU states. This could affect over 35,000 UK small businesses.
  • EU Member States will treat goods entering the EU from the UK in the same way as goods entering from other non-EU countries with associated import VAT and customs duties due when the goods arrive into the EU.


Exporting services into the EU

  • The factors for determining where VAT is payable, the ‘place of supply’ rules, will remain the same for sales of services to businesses and individuals.
  • This is the same for digital services provided from the UK to EU consumers, but the use of the 2015 mini one stop shop reporting may change later, including UK businesses re-registering under the non-union scheme.
  • For UK businesses supplying insurance and financial services, if the UK leaves the EU without an agreement, input VAT deduction rules for financial services supplied to the EU may be changed. More updates will follow.


UK VAT numbers

  • The UK will develop its own online VAT number validation portal, similar to the EU’s VIES.


Draft legislation: amendment of the VAT (Input Tax) (Specified Supplies) Order 1999

On 19 July 2018 the government announced, through a written ministerial statement to Parliament, that it will legislate to deal with a particular version of VAT avoidance that involved ‘looping’ financial services via non-VAT territories.

A draft statutory instrument that will amend the Specified Supplies Order accordingly has been published, along with a draft explanatory memorandum.

Buildings and construction

VAT Notice 708: Buildings and construction, has been amended to show that a dwelling can consist of more than one building.

VAT liability of damp proofing products

Revenue and Customs Brief 9(2018): VAT - damp proofing products

Revenue and Customs Brief 9 (2018) clarifies HMRC's policy on the VAT liability of damp proofing products like paints, creams and gels from 1 September 2018. These products are not eligible for reduced rating as energy saving materials and are therefore subject to standard rated VAT from 1 September 2018.

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Andrew Needham

Written by Andrew Needham

Andrew Needham is a Chartered Tax and heads VAT Specialists Ltd, Andrew has a degree in Law from UCNW Bangor and is a specialist in indirect taxes. Andrew has over 20 years' experience in VAT having spent 7 years in HM Customs & Excise, firstly as a VAT inspector, then as a departmental trainer, and finally in a headquarters policy unit dealing with the introduction of the EU single market.

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