Clients who export goods from Great Britain (England, Wales and Scotland) to EU countries, may need to register for VAT in that destination country from 1 January 2021. There are special rules for businesses based in Northern Ireland.
Similarly, businesses based outside of the UK that sell into the UK may need to register for VAT in the UK from 1 January 2021.
Currently (until midnight: EU time, on 31 December 2020) UK businesses can use VAT concessions for call-off stock that apply to EU suppliers. But from 1 January 2021, the UK will no longer be treated as a member of the EU as the transition period will have come to an end.
A business in Wales manufactures cosmetics and send stocks to warehouses throughout Europe. Those stocks are held by the Welsh supplier until the local VAT registered retail businesses need the product. At that point the stock is called off, a sales invoice is raised, and the VAT registered customer accounts for the VAT due on the product on his own VAT return.
From 1 January 2021 import VAT and duties will have to be paid on the cosmetics when they arrive in the EU. The Welsh manufacturer must register for VAT in the country they export to, complete VAT returns and charge domestic VAT on future sales. The fact that the goods will be sold to known VAT registered customers is no longer relevant.
These VAT changes will happen whether or not there is a “trade deal” with the EU, but that deal will determine what level of customs duties and tariffs will apply to goods being shipped into other EU countries.
Written by the Tax Advice Network