The UK left the EU on 31 January 2020 but all trading arrangements, including VAT, are held in suspension until the end of the transition period on 31 December 2020.

Whatever deal is finally agreed between the EU and the UK government, the VAT rules for UK traders will be different from 1 January 2021, as the UK will be treated as a third country rather than as a member of the EU.

These are some of the VAT changes that UK businesses need to prepare for:

  • Sellers of digital services, such as e-books, will no longer enjoy an exemption from VAT MOSS reporting where sales to customers in the EU are less than £8,818 per year. The UK business will have to register for VAT in an EU country in order to report and pay VAT on all digital sales under the non-Union VAT MOSS scheme.
  • Sellers of goods into the EU using Fulfilment by Amazon (FBA) will need to move goods into one of Amazon’s EU fulfilment centres. The UK business will need to pay EU import VAT and customs tariffs on these goods, as well as complete export and import customs declarations. The business may need an EU VAT number to pay and declare the import VAT.
  • Sellers who transfer goods directly to EU customers will have to register for VAT in each country they sell into, or move a proportion of goods into one country and sell on a distance-selling basis from there.
  • Buyers of goods from the EU worth less than £135 will have to pay VAT on those goods at the purchase point. Online marketplaces in the UK will become the deemed seller of imported goods worth less than £135, so must calculate the VAT and tariffs and bill the UK customer at the checkout.

These are just a fraction of the major changes that result from the UK leaving the EU.