The implementation of Brexit means that from 1st January 2021 controls have been in place on the movement of goods and services between the UK and the EU. This means that the VAT treatment of imported and exported goods with European countries will now be the same as with Non-EU countries (i.e. the rest of the world).

Changes relating to Brexit are required for all VAT Returns submitted after 8th April 2021. Brexit rules will continue to develop over the coming months.

For many, there will be no or minimal change relating to Brexit itself to their VAT Returns. Though many may be impacted if they import goods (including now from the EU) and choose to use Postponed VAT Accounting.

Nothing will change in the mechanics of how you submit your VAT return itself, that will be the same as before. However, there are changes to what numbers should be entered into some boxes on the VAT Return, should you be affected by the following:

  • You will need to submit different figures in relation to EU trading (i.e. Boxes 2, 4, 8 & 9)
  • There are also new rules required with the introduction of Postponed VAT Accounting for all Imports (i.e. imports from EU and the rest of the world) relating to Boxes 1, 4 & 7.

Changes are required to the VAT Return due to Brexit and the Northern Ireland Protocol (i.e. trade with the EU via Northern Ireland).

As far as the VAT Return is concerned, the old EU reporting in Boxes 2, 4, 8 & 9 no longer applies. From now, on only trade to and from the EU via Northern Ireland needs to be disclosed in Boxes 2, 4, 8 & 9 in relation to the EU.

There are additional changes to the VAT Return relating to the VAT on imports and the introduction of Postponed VAT Accounting for VAT on imports (from EU & the rest of the world) relating to Boxes 1, 4 & 7.

If you import goods into the UK from any other country in the world, you are most likely to have to pay import VAT on the goods. Following Brexit, this also now applies to goods imported from the EU. This import VAT is payable on entry to the UK, you may also need to pay import duty.

See HMRC guidance relating to importing goods into the UK:



Postponed VAT Accounting allows you to delay the accounting of VAT on imports. Instead of having to pay the VAT on entry and then reclaim it later on your VAT Return; you can declare and claim the VAT at the same time, on the same VAT Return. This means that the requirement to pay the import VAT is postponed until the VAT Return where you can reclaim it. The resulting entries required to your VAT Return are:
Include the following amounts to the following boxes:

  • Box 1: VAT due on imports
  • Box 4: VAT reclaimed on imports - Therefore, if these values are the same, the net result will be Nil.
  • Box 7: Include the total value of all imported goods in with the total of all other purchases (excluding VAT).

Postponed VAT Accounting therefore avoids the negative cashflow impact of VAT on importing, i.e. of having to pay on entry and having to wait to reclaim it later on your VAT Return. It also means that the goods won’t be held-up at customs while the import VAT bill is settled.

Postponed VAT Accounting isn’t mandatory. Alternatively, a business can choose to pay import VAT on importation and reclaim the VAT on your next VAT return, subject to the normal rules for claiming input VAT and a C79 form Import VAT certificate.

Register for a GB EORI

If you plan to import or export any goods outside the UK, your business will need to be issued with a GB EORI (Economic Operator Registration and Identification) number, (or XI for Northern Ireland).

Your EORI number must have a GB at the front. If you have an EORI but it doesn’t have a GB prefix, you’ll need to apply for a new one with a GB prefix (or XI for Northern Ireland). This GB EORI number and your VAT number will need to be included on your customs declarations.

Follow HMRC guidance on obtaining a GB EORI:



Register with the Customs Declaration Service

The import VAT to be included in your VAT Return must be accessed on an online monthly statement. This will be available to you once registered with the HMRC Customs Declaration Service:

You monthly Import VAT statement must be downloaded and kept as evidence (the online portal will not keep records beyond a few months). See HMRC guidance:

The normal rules about what VAT can be reclaimed as input tax will still apply – i.e. business use, documentation, records, etc:

N.B. Special rules apply to trade with Northern Ireland – if that applies, please check.

Note

VAT, duty and customs rules are complex. This note is a brief introduction to help your VAT Return submission relating to the new Brexit changes and is not a full explanation. Links to some HMRC guidance has been included for further information. Obtain advice on your own specific circumstances and check whether any relevant rules have changed. Brexit rules will continue to develop over the coming months. Please review HMRC guidance for future changes.

a) Calculation of VAT Due

Box 1

Include the VAT due on all goods and services you supplied in the period covered by the return. This does not include exports or dispatches as these are zero rated. Include the VAT due in this period on imports accounted for through postponed VAT accounting **(see Box 4 below).

Box 2

For goods moved under the Northern Ireland protocol only. Show the VAT due (but not paid) on all goods and related services you acquired in this period from EU Member States.

Box 3

This figure is automatically calculated by the VAT Return. The total amount of the VAT due ie the sum of boxes 1 and 2. This is your Total Output Tax.

Box 4

Show the total amount of deductible VAT charged on your business purchases. This is referred to as your ‘Input VAT’ for the period. Include:

  • your box 2 figure re EU purchases via Northern Ireland
  • the VAT reclaimed in this period on imports accounted for through postponed VAT accounting **(see Box 1 above).

Box 5

This figure is automatically calculated by the VAT Return. It takes the figures in boxes 3 and 4 and deducts the smaller from the larger and enters the difference in box 5. If this amount is under £1, you need not send any payment, nor will any repayment be made to you, but you must still fill in this form and submit it to HMRC.

b) Comparative Total Figures (excluding VAT)

Boxes 6 and 7

In Box 6 show the value excluding VAT of your Total Outputs (supplies of goods and services). Include zero rated, exempt outputs and EU supplies via Northern Ireland from box 8.

In Box 7 show the value excluding VAT of all your Inputs (purchases of goods and services). Include the value of all imported goods, zero rated, exempt inputs and EU acquisitions via Northern Ireland from box 9.

c) Northern Ireland Protocol European Community Trading Totals (excluding VAT)

Boxes 8 and 9

EU trade under the Northern Ireland protocol only

Only use boxes 8 & 9 if you have supplied goods to, or acquired goods from, an EU Member State under the Northern Ireland protocol. Include related costs such as freight and insurance where these form part of the invoice or contract price.

The figures should exclude VAT.

You can find details of EU Member States in Notice 60 and Notice 725 or on our website at www.gov.uk/topic/business-tax/vat and at www.uktradeinfo.com under Intrastat.

In Box 8 show the total value (exclude VAT) of all supplies of goods and related costs, excluding any VAT, to EU Member States from Northern Ireland.

In Box 9 show the total value (exclude VAT) of all acquisitions of goods and related costs, excluding any VAT, from EU Member States to Northern Ireland.

We’ve provided some simple guidance and useful links as an introduction to help you. However, this guidance and links are not comprehensive and the VAT regulations are complex. For a full understanding of the rules, please refer to HMRC guidance on their website or discuss with your accountant how the rules apply to your specific circumstances. Please bear in mind that responsibility for the accuracy of your tax affairs remains with you, the taxable person.

Last updated on: 06-Apr-2021