HMRC have issued an impact assessment for VAT and services if the UK leaves the EU without a deal.
The impact assessment covers the effect on businesses of amendments to existing VAT legislation and the introduction of transitional provisions for the supply of services between the UK and the EU
Summary
Under current rules:
- VAT is charged on most goods and services sold within the UK and the EU
- the place of supply rules for services determine the country in which a business should charge and account for VAT
If the UK leaves the EU without a deal, he UK will continue to have a VAT system. This is unsurprising as it is a major revenue raiser for the Treasury and the taxpayer is required to do all the heavy lifting the tax involves.
HMRC say the published Statutory Instruments (Sis – details of which may be found in the impact assessment but mainly The Taxation – Cross-border Trade Act 2018) broadly maintain the current VAT treatment in the event of a No-Deal Brexit. It expects that “they will have either a negligible impact on the administrative burden on businesses or no impact.”
This seems, prima facie, difficult to swallow.
HMRC also anticipate that an exception to the above is the removal of the VAT Mini One Stop Shop (MOSS), which “may have a significant ongoing cost for some EU and non-EU businesses.”
The impact assessment refers to the Economic Analysis of Brexit which makes interesting reading.
Of course, the House has voted against a No-Deal Brexit, so we can rely on that… can’t we?