Businesses that use the HMRC portal to reclaim VAT incurred on overseas expenses, or to pay VAT due under VAT MOSS, may find that the portal snaps shut shortly after Brexit.
It’s not only businesses that trade goods with other EU countries that should worry about Brexit. Many service-based businesses will also be adversely affected, as online portals and arrangements open to all EU businesses will cease to be accessible to UK businesses once the UK leaves the EU. The exact day on which the portals and arrangements close will depend on whether a withdrawal agreement is ratified by the UK Parliament or not, and what exactly is reported.
If there is no withdrawal agreement, in other words the UK leaves the EU without a deal, there will be no transitional period, and most VAT arrangements for EU businesses will cease to apply to UK businesses at 23.01 GMT on 29 March 2019.
What can UK businesses do to limit the damage or the inconvenience?
Claiming VAT refunds
Where a business has paid VAT on business expenses incurred in another EU country during 2018, it would normally have until 30 September 2019 to reclaim that VAT. This is currently done via the EU VAT refund electronic system, which is accessed through HMRC’s online VAT services. HMRC directs the claim to the right EU country and provides the business with a reference number.
HMRC is urging all businesses to submit any claims for refunds of EU VAT before 5pm on 29 March 2019. If claims are submitted after that time, HMRC won’t be able to forward them on to the relevant EU country. Claims need to be submitted for a full calendar year, or for a full quarter.
To make claims after this cut-off point the business will have approach the tax authority of the country where the expenses were incurred. To make the claim, the business may need to appoint a local tax representative and provide a certificate of taxable status.
VAT MOSS threshold
A minimum turnover threshold of €10,000 was introduced for VAT MOSS from 1 January 2019, which was written into UK law as £8,188. Although a relatively low level of turnover, it was judged to be high enough to take most small UK traders out of VAT MOSS from 2019 onwards.
However, as Wendy Bradley pointed out, this could be a brief release from VAT MOSS as the new minimum turnover threshold does not apply for non-EU businesses. Thus, many of the UK businesses which dropped out of VAT MOSS and deregistered from 1 January 2019 will be pulled back into that regime from 30 March 2019.
Re-registering for VAT MOSS
If a UK business makes a sale of digital services to a non-business customer in an EU country after 29 March 2019, they will be required to register for VAT MOSS by the 10th of the month following the month in which that sale was made.
Those UK businesses still registered for VAT MOSS in 2019 will have their VAT MOSS registration cancelled automatically from 1 April 2019. If those businesses continue to make sales of digital services to non-business customers located in the EU, they will have to re-register for VAT MOSS by 10 April 2019 in an EU member state, as a non-EU trader.
VAT MOSS payments
The VAT MOSS return and payment must be submitted by the 20th of the month following the end of each calendar quarter. UK businesses within VAT MOSS need to make a return for the sales made between 1 January 2019 and 11pm on 29 March 2019, by 20 April 2019. HMRC has assured UK businesses that the portal to submit their VAT MOSS return will remain open until 20 April 2019, but not after that date.
However, UK businesses will not be able to use that VAT MOSS portal to report sales of digital services to EU consumers made on and after 30 March 2019.
Check VAT number
Currently, there is a VAT number checking service (VIES) to check the validity of EU VAT registration numbers.
From 30 March 2019, the VIES service won’t cover UK VAT numbers but businesses will be able to check UK-only VAT registration numbers using a service on GOV.UK (which has yet to be launched).
In addition, UK businesses will continue to be able to use the VIES service to check the validity of any other EU VAT registration numbers.