Domestic VAT rules remain the same following the end of the transition period. However, VAT rules relating to imports and exports to and from the EU will change.Prior to Brexit and during the transition period, the UK was part of the EU VAT regime. This means a UK business didn’t have to register for VAT in each EU country, and instead applies a common set of rules in relation to VAT. It also means UK businesses were able to use various VAT simplifications such as distance selling thresholds and online VAT refund process.
However, as of 1 January 2021, UK businesses will treat EU countries like they already do countries outside the EU.
The VAT terminology will change accordingly. Trade with EU countries will cease to be called dispatches and acquisitions, and will instead be referred to as imports and exports – again, in line with trade with non-EU countries.
In broad terms, VAT will be payable upon import, although the UK government has introduced the postponed VAT payment system to avoid cash flow issues. This lets businesses importing goods into the UK account for the VAT on their next VAT Return, and means the goods can be released from customs without the need for VAT payment.
This means that nothing will effectively change from a cash flow point of view compared to before, although there will obviously be new administrative requirements.Read more:
