What are the changes occurring with the UK VAT after Brexit?

Jordan Macey

April 21, 2021

No items found.
Download Now ↓
Small Business Accounting

Here's a brief overview of the VAT changes occurring after Brexit:

Exporting goods to the EU:

  • EC Sales List: Previously, UK VAT-registered businesses that met specific conditions and were supplying goods to VAT-registered customers in the EU had to complete an EC Sales List. This is no longer required.
  • Distance selling threshold: Starting from 1 January 2021, UK sellers can no longer take advantage of the distance selling thresholds.

Importing goods from the EU to the UK:

  • Abolition of Low Value Consignment Relief (LVCR): The LVCR, which relieves import VAT on goods valued at £15 or less will no longer apply to goods imported into the UK, or for goods supplied to Northern Ireland from outside the UK and EU.  
  • Postponed VAT accounting: Starting from 1 January 2021, UK VAT registered businesses importing goods from locations worldwide into the UK can use a new system known as postponed VAT accounting.
  • The £135 threshold: Starting 1 January 2021, the point at which VAT is collected on imported goods valued at up to £135 is moved from the point of importation to the point of sale. UK supply VAT—not import VAT—will be charged at the point of sale.

EU VAT Registration Number Validation service:

  • UK businesses will be able to continue to use the EU VAT number validation service to check the validity of EU businesses, but UK VAT registrations will cease to be included.

VAT flat rate scheme:

  • The scheme no longer applies to any sales a seller makes through an online marketplace, where the OMP is liable to account for VAT.

EU VAT refund system:

  • UK businesses can no longer reclaim VAT incurred in other EU countries using the electronic EU VAT refund system.

Further details on the above mentioned changes can be found in our VAT guide for ecommerce businesses.

There are additional VAT changes implemented that do not apply to ecommerce merchants. These include:

  • The VAT treatment of the supply of services to the EU
  • The abolition of the £8,818 annual threshold for cross borders sales of digital services to EU consumers
  • Businesses are no longer able to use the UK’s MOSS scheme to report and pay VAT on sales of digital services to consumers in the EU. The new rules regarding the registration for the VAT MOSS non-union scheme in an EU member state will impact UK and non-UK businesses.

Download our Ultimate Expenses Guide

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
No items found.
No items found.

Download our Ultimate Expenses Guide

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
No items found.
No items found.

What's Inside:

No items found.

Read More Guides below:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
How do I deregister for VAT? Guide

How do I deregister for VAT?

You can cancel your VAT registration online, or by sending form VAT7 via post.

Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
What is the VAT Flat Rate Scheme? Guide

What is the VAT Flat Rate Scheme?

The VAT flat rate scheme is one of the various VAT schemes business owners can register for, in which a fixed rate of VAT is paid to HMRC. The scheme simplifies the VAT return process for small businesses, saving them the hassle of tracking VAT on purchases.

Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Should I register for VAT? Guide

Should I register for VAT?

There are instances whereby VAT registration is mandatory, such as when your VAT taxable turnover exceeds the current threshold of £85,000. If you're not legally required to register for VAT, you'll then need to weigh out the benefits (enhances image, reclaim VAT) against the downsides (administrative burden, unexpected VAT bills).

Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Ultimate Guide to Starting An Ecommerce Business Guide

Ultimate Guide to Starting An Ecommerce Business

There's no denying that starting an ecommerce business is hard work. There are many decisions to be made, and multiple aspects you need to plan and strategize-from choosing a business model and products, to registering your company, creating a well-thought-out exchange and returns policy and more.

To help, we've put together a comprehensive guide to getting started. We'll run through the essentials, starting with the main types of ecommerce business models you should consider.

Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
How do I find my VAT number? Guide

How do I find my VAT number?

You can locate your VAT number on the VAT registration certificate issued by HMRC. Your VAT number will contain nine digits, with the first two digits indicating the country code (‘GB' for UK businesses).

Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
What are the advantages of VAT registration:? Guide

What are the advantages of VAT registration:?

The advantages of VAT registration are:

  • It enhances the perception of your business: Registering for VAT tends to lend credibility to your business, and makes your company appear larger and more established.
  • You can reclaim VAT: You can reclaim VAT on goods and services you've purchased from other businesses, and this can be advantageous in certain situations.
Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Do I need to register for VAT? Guide

Do I need to register for VAT?

You need to register for VAT if:

  • your VAT taxable turnover exceeds the current threshold of £85,000 (for a 12-month period ending in 2020/21). The VAT taxable turnover refers to the total value of everything that you sell that isn't exempt from VAT.
  • you expect your VAT taxable turnover to exceed £85,000 in the next 30-day period
  • your business had a taxable turnover exceeding £85,000 over the last 12 months

You need to register for VAT within 30 days of fulfilling any of these conditions.

Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
When should I charge VAT? Guide

When should I charge VAT?

You should charge VAT when your business becomes VAT registered-whether the registration is mandatory or voluntary.

VAT registration is mandatory when:

  • your VAT taxable turnover exceeds the current threshold of £85,000 (for a 12-month period ending in 2020/21). The VAT taxable turnover refers to the total value of everything that you sell that isn't exempt from VAT.
  • you expect your VAT taxable turnover to exceed £85,000 in the next 30-day period
  • your business had a taxable turnover exceeding £85,000 over the last 12 months

If you're thinking about registering for VAT voluntarily, these are the main benefits and downsides you should consider:

Benefits:

  • It enhances the perception of your business
  • Able to reclaim VAT

Downsides:

  • Administrative burden
  • It makes your goods or services seem more expensive
  • You may be faced with an unexpected VAT bill
Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
How do I claim back VAT? Guide

How do I claim back VAT?

You can reclaim VAT by submitting a VAT return.

You need to have valid VAT invoices, keep records as proof for your claim and show how you calculated the business proportion of a purchase.

Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
How do I register for flat rate VAT? Guide

How do I register for flat rate VAT?

You'll first need to check that you're eligible for the VAT Flat Rate Scheme.

If you're eligible, you can join the scheme online when you register for VAT, or submit the VAT600 FRS through one of the methods below:

BT VAT

HM Revenue and Customs

BX9 1WR

You'll receive notification that you've joined the scheme through your VAT online account, or by post if you did not apply online.

Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
A Guide to VAT for Ecommerce Businesses Guide

A Guide to VAT for Ecommerce Businesses

At Forma, we work with startups and small businesses across industries. As such, we're familiar with many of the challenges that ecommerce solopreneurs and small business owners face on a day-to-day basis.

You need to wear multiple hats and juggle numerous tasks-including dealing with VAT. It can be complex, and is one of those things that can make even an experienced entrepreneur break out in a cold sweat.

To help you along, we've put together a resource to help you understand the basics of VAT and stay ahead of post-Brexit changes.

Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Post-Brexit Guide: Importing from EU to the UK Guide

Post-Brexit Guide: Importing from EU to the UK

Ecommerce businesses haven't had the easiest time navigating the post-Brexit changes, to say the least. You've had to stay up-to-date on changes to the UK's customs landscape and VAT, and figure out the steps you need to take to adhere to new measures.

To help you along, we've provided an overview of the customs procedures for importing goods from the EU to the UK below.

Bear in mind that this is a general guide, and isn't a substitute for specific advice. If you need further information about VAT, feel free to reach out to our tax consultants at Forma.

Obtain an EORI number

Businesses will now require an EORI number-or Economic Operators Registration and Identification number-to import goods into the UK.

You'll need to check the type of EORI number you need. Depending on the location you import from or export to, you may require more than one EORI number.

If you're based in the UK, you should obtain an EORI number that begins with GB. If you already have an EORI number that doesn't with GB, you'll have to apply for a GB EORI number. If you're moving goods to or from Northern Ireland, you'll need to obtain an EORI number that begins with XI. Do note that you can't apply for an XI EORI number, unless you already have a GB EORI number.

If you need to apply for an EORI number, bear in mind that it can take up to one week for the application to be completed.

Find out if the post-Brexit changes regarding import VAT apply to your business

Following Brexit, new VAT rules relating to imports, exports, the EU VAT refund system and more have been established.

We've summarised the key changes you need to know if you're importing into the UK in our VAT guide for ecommerce businesses. These include:

  • Abolition of the Low Value Consignment Relief (LVCR)
  • Duty deferment account
  • Introduction of the £135 threshold
  • Introduction of the postponed VAT accounting.

Do note that the postponed VAT accounting is mandatory if you choose to defer the submission of customs declarations. We'll run through the details of completing your import declarations below.

Check that the business sending you goods is able to export to the UK

You need to ensure that the business sending you goods has all the necessary steps required to export to the UK. It includes:

  • Making an export declaration in their country
  • Obtaining the required EU licences or certificates
  • Having an EU EORI number
  • Having a statement of origin
  • Having a commercial invoice
  • Having a packing list

Additional resources:

Preferential tariffs and the rules of origin

The UK and EU have agreed on a free trade agreement, which came into force on 1 January 2021.

For businesses that export and import between the UK and EU, this has an important implication: the agreement provides businesses with customs duty and quota-free access to the respective markets, provided that the rules of origin are met.

To find out if you can claim a preferential rate of duty, you need to check if your goods meet the rules of origin. If the goods meet the rules, you'll need to obtain a proof of origin. The type of proof required will vary depending on the type of goods you have, where it is imported from or where the goods will be exported to.

You should also check if you're able to pay a lower rate of duty, or delay paying duty.

Additional resources:

Applying for a duty deferment account

A duty deferment account lets you delay paying customs charges such as customs duties, excise duties and import VAT (if you're not using the postponed VAT accounting system). You'll be able to make monthly payment through Direct Debit, rather than paying for individual consignments immediately upon import.

If you're importing goods on a regular basis, making monthly payments will likely be a more convenient option. There are also instances where applying for a duty deferment account is mandatory, such as when you're using the simplified frontier declaration system

Do note that the new rules for duty deferment will apply in Great Britain. While obtaining a financial guarantee was a requirement previously, businesses now have the option of applying for a guarantee waiver for their account.

Additional resources:

Import licences and certificates

Depending on the type of goods you import, you may need to obtain an import licence or certificate.

Commodity codes

Use HMRC's Trade Tariff tool to find the right commodity code for the goods you're importing.

Work out the value of your goods

When you complete your import declaration, you're required to indicate the value of your goods. This is required for the calculation of the duty and VAT you need to pay, as well as for trade statistics.

Read HMRC's guidance to learn about the different methods you can use to work out the value of your goods.

Completing your import declarations

You'll need to decide how you'll complete your import declarations.

You have the option of either completing the import declarations on your own, or through using customs intermediaries such as freight forwarders, fast parcel operators and customs agents or brokers.

Due to the complexity of the procedures, using an intermediary is the recommended option for businesses. This HMRC guide provides further instructions on steps you need to take.

If you choose to complete import declarations on your own, there are a few important things you need to know:

  • Deferring import declarations until 30 June 2021: From January 2021 till 30 June 2021, customs declarations may be deferred for imported goods from the EU. Customs payments may also be deferred until the declaration is submitted. Do note that there are exceptions (such as if you're importing controlled goods) and qualifying conditions (for instance, you'll need to be authorised by HMRC to use the simplified declaration procedure). Find out more on the HMRC guide.
  • Using the simplified declaration procedure (SDP): Depending on factors like the type of goods you're importing, you may be able use the simplified declaration procedure. See the HMRC guide for further guidance on what you need to, including instructions on how to check if you're able to use the SDP.
  • Registering for the CHIEF system: CHIEF refers to the government's Customs Handling of Import and Export Freight service. You'll need to be registered for the CHIEF system, and use software that's compatible with CHIEF. While the CHIEF service is scheduled to be replaced by the Customs Declaration Service in the future, it remains in use for the time being.

Additional resources:

Review Incoterms

Depending on the choice of Incoterms used in a contract, the buyer and seller will have different customs duty responsibilities. In light of the post-Brexit changes, you need to review your contracts to check if updates should be made to your contract terms and Incoterms.

Additional resources:

Intrastat declarations

If you're a VAT-registered business, you may need to submit monthly Intrastat returns on ‘arrivals' (goods imported from VAT-registered suppliers in EU member states) if the value of goods exceed the stipulated annual thresholds:

  • Your business receives more than £1.5 million worth of goods from the EU in any calendar year
  • Your business moves more than £250,000 worth of goods to the EU from Northern Ireland in any calendar year

If the conditions above apply, submitting Intrastat declaration is required:

  • For the rest of 2021, if you're importing into Great Britain from the EU
  • Until the end of the NI Protocol, if you're importing into Northern Ireland from the EU

Additional resources:

Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
VAT Calculator Guide

VAT Calculator

Working out the VAT

With our calculator, you can work out your VAT in just a few quick clicks.

If the price doesn't include VAT:

  • Select the ‚ÄòAdd VAT' option
  • Select the rate of VAT on the slider
  • You'll obtain the gross price (inclusive of VAT) and the VAT element of the bill.

If the price includes VAT:

  • Select the ‚ÄòExclude VAT' option
  • Select the rate of VAT on the slider
  • You'll obtain the pre-VAT price (exclusive of VAT) and the VAT element of the bill.

VAT basics: What you need to know

VAT, or Value Added Tax is a consumption tax that is applied to most goods and services. While the standard rate (20%) applies in most cases, there are items-such as children's car seats and sanitary products-that are charged at the reduced rate of 5%. Using the slider on our calculator, you'll be able to calculate the VAT and gross or net prices for different VAT rates. If you're unsure about the correct rate you should apply, refer to HMRC's resource on VAT rates.

Resources:

-

Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
How will Brexit affect imports, exports, and shipping? Guide

How will Brexit affect imports, exports, and shipping?

Brexit has created a significant impact on imports, exports and shipping:

  • Ecommerce businesses will be affected by post-Brexit VAT changes, which includes the abolition of the distance selling threshold and Low Value Consignment Relief (LVCR), the introduction of the postponed VAT accounting system and more.
  • Businesses will have to abide by the new import and export rules, which may mean dealing with additional paperwork and customs checks.
  • The above mentioned changes will further impact other aspects of your business, such as your supply chain, fulfillment process and pricing. Additional checks may create shipping delays, while the new VAT changes will lead to a rise in costs.
Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
How will ecommerce businesses be impacted by the Brexit trade deal? Guide

How will ecommerce businesses be impacted by the Brexit trade deal?

Here's a brief summary of the ways in which ecommerce businesses will be impacted:

  • Businesses will have to abide by the new import and export rules. We've covered the VAT changes impacting ecommerce businesses in greater detail in our guide.
  • Businesses may face additional paperwork and customs checks.
  • These changes will impact other aspects of your business, such as your supply chain, fulfillment process and pricing. Additional checks may mean a delay in shipping, while the new VAT changes will lead to a rise in costs. As such, businesses may need to decide who will bear the burden of the increased costs, and to assess if revising their prices is necessary.
  • UK citizens and companies established solely in the UK will no longer be eligible to hold .eu domains. This will likely result in additional costs incurred, as business purchase new domains or undertake the necessary measures to demonstrate compliance with the .eu regulatory framework.
Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Managing invoices whilst waiting for VAT registration Guide

Managing invoices whilst waiting for VAT registration

During the time between submitting your application and waiting for your VAT registration number, you won't be able to issue VAT invoices or to show VAT as a line item on your invoices.

To get around this issue, you can include VAT in the invoice total amount-without indicating VAT as a line item or showing it in your invoice. For instance, if you're charging a client £100 for a service rendered, you'll invoice the client for £120 to account for the standard rate VAT of 20%.

When you've received your VAT registration number, you can then reissue the invoice for £100 (and include £20 VAT as a line item).

Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
When do I need to register for VAT? Guide

When do I need to register for VAT?

VAT registration is mandatory when you fulfill the conditions indicated below, and you're required to register within 30 days of fulfilling any of these conditions.

  • Your VAT taxable turnover exceeds the current threshold of £85,000 (for a 12-month period ending in 2020/21). The VAT taxable turnover refers to the total value of everything that you sell that isn't exempt from VAT.
  • You expect your VAT taxable turnover to exceed £85,000 in the next 30-day period
  • Your business had a taxable turnover exceeding £85,000 over the last 12 months
Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
What are the changes occurring with the UK VAT after Brexit? Guide

What are the changes occurring with the UK VAT after Brexit?

Here's a brief overview of the VAT changes occurring after Brexit:

Exporting goods to the EU:

  • EC Sales List: Previously, UK VAT-registered businesses that met specific conditions and were supplying goods to VAT-registered customers in the EU had to complete an EC Sales List. This is no longer required.
  • Distance selling threshold: Starting from 1 January 2021, UK sellers can no longer take advantage of the distance selling thresholds.

Importing goods from the EU to the UK:

  • Abolition of Low Value Consignment Relief (LVCR): The LVCR, which relieves import VAT on goods valued at £15 or less will no longer apply to goods imported into the UK, or for goods supplied to Northern Ireland from outside the UK and EU.
  • Postponed VAT accounting: Starting from 1 January 2021, UK VAT registered businesses importing goods from locations worldwide into the UK can use a new system known as postponed VAT accounting.
  • The £135 threshold: Starting 1 January 2021, the point at which VAT is collected on imported goods valued at up to £135 is moved from the point of importation to the point of sale. UK supply VAT-not import VAT-will be charged at the point of sale.

EU VAT Registration Number Validation service:

  • UK businesses will be able to continue to use the EU VAT number validation service to check the validity of EU businesses, but UK VAT registrations will cease to be included.

VAT flat rate scheme:

  • The scheme no longer applies to any sales a seller makes through an online marketplace, where the OMP is liable to account for VAT.

EU VAT refund system:

  • UK businesses can no longer reclaim VAT incurred in other EU countries using the electronic EU VAT refund system.

Further details on the above mentioned changes can be found in our VAT guide for ecommerce businesses.

There are additional VAT changes implemented that do not apply to ecommerce merchants. These include:

  • The VAT treatment of the supply of services to the EU
  • The abolition of the £8,818 annual threshold for cross borders sales of digital services to EU consumers
  • Businesses are no longer able to use the UK's MOSS scheme to report and pay VAT on sales of digital services to consumers in the EU. The new rules regarding the registration for the VAT MOSS non-union scheme in an EU member state will impact UK and non-UK businesses.
Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
What are the VAT rates for different goods and services? Guide

What are the VAT rates for different goods and services?

There are three VAT rates: standard rate (20%), reduced rate (5%) and zero rate (0%). VAT is not charged for exempt or out of scope items, and the standard rate applies to most goods and services. Refer to HMRC's resource for further information on what VAT you should charge based on the type of goods or services you provide.

Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
How to Start an Ecommerce Business Guide

How to Start an Ecommerce Business

  • Types of Ecommerce Business Models
  • How to/ if you need to register your business
  • Accounting software requirements
  • Understanding VAT
  • Brexit Import checklist
  • Brexit Export checklist
Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.