VAT and Brexit

VAT and Brexit

A key area for many Irish businesses will be the impact of VAT and the effects that may arise as a result of Brexit. The system of cross-border transactions was directly affected as of 1 January 2021. Invoicing and reporting has changed with regard to supply chain in particular, cross-border and with transactions between Ireland and the U.K. This may result in a cash flow cost and also increased administration and compliance costs for Irish companies trading with the U.K.

The likely VAT effects of Brexit on the supply of goods to and from the EU may also include:

  • Businesses which incur UK VAT will have to file paper based 13th Directive claims.  Generally this is a slower process with no pressure on Tax Authorities to repay VAT within a pre-determined time frame. Current EVR/8th Directive process will no longer be of relevance.
  • ‘Distance Sales’ i.e the supply of goods to consumers based in other EU Member States to UK consumers may no longer be treated as such. 

For example, a Vendor arranges transport of the goods. Registration thresholds exist for each EU Member State with a view to discouraging cross border purchases by consumers based on lower VAT rates in Member States in which supplier is based.  Supplies will need to register for VAT in the UK or alternatively customers will be liable for import VAT and duty. 

  • Suppliers of goods cross border charge local VAT applicable in country of customer and account for same via local return. Post Brexit supplies to UK consumers will fall outside the One Stop Shop supplies for EU based TBE suppliers and UK service providers will be obliged to register in another EU Member State under the non EU Mini One Stop Shop Scheme.
  • UK based travel agents making supplies of accommodation in EU may need to register for VAT to buy and sell travel related services as TOMS (Tour Operator Margin Scheme) will probably no longer automatically apply.

Brexit will result in additional costs, bureaucracy and lead times. It is very important for Irish businesses to minimise the impact on their business.