No Deal Brexit - Changes To Accounting For Electronically Supplied Services In The UK And EU Wide IT Systems

February 2019

As we have highlighted in previous updates, if the UK leaves the EU without a deal, from 11pm GMT on 29 March 2019, many UK businesses will be impacted by changes to processes when trading with other EU countries.

Some of these changes relate to Electronically Supplied Services and EU wide VAT IT systems, we have set out below the changes that will take effect in a ‘no deal’ scenario.

Electronically Supplies Services and the VAT Mini One Stop Shop

Currently, businesses can use the UK’s VAT Mini One Stop Shop (MOSS) to declare VAT on sales of digital services to consumers in the EU. This is a requirement because the sale of digital services to EU individual consumers is subject to VAT, in their member state of residence.

If you use MOSS, you can use it to submit your transactions and pay your VAT liability up to 29 March 2019. In a no deal scenario, you will not be able to use the UK’s MOSS portal after this date.

In order to continue to use MOSS, businesses will need to register for MOSS in an EU member state, this needs to done by 10 April 2019, if you file returns on a calendar quarterly basis. Alternatively, you can register in each EU Member State where you make sales.

Also to note, non-UK businesses currently using UK VAT MOSS non-Union scheme will need to register for the scheme in an EU member state, and non-UK businesses will need to declare sales of digital services to UK consumers by registering for VAT in the UK and declaring the sales via a UK VAT return.

Digital services threshold

On 1 January 2019, a new threshold was introduced for suppliers of digital services to consumers in EU member states, accounting for VAT in the consumer’s member state could be avoided if a UK suppliers digital services were below £8,818 per annum. In the event of a no deal Brexit, this will no longer apply to UK business, there will be no threshold and VAT in the consumers member state will need to accounted for.

EU wide IT systems

The following changes will take effect in a no deal Brexit.

Claiming EU VAT refunds – Any refunds of VAT incurred in other EU Member states, currently claimed via the online VAT portal, will need to be submitted by 5pm on 29 March 2019. Anything submitted after this date and time will not be processed.

After 29 March, you must claim VAT refunds from EU member states by using the relevant member state’s existing process for businesses based outside the EU. This is usually a paper return, completed in the language of the country where the VAT was incurred/being claimed. The process for each EU member state varies and will need to be considered and understood.

Checking a VAT number – Currently VAT numbers can be checked on an EU wide database, from 30 March you will be able to check UK-only VAT registration numbers on HMRC’s website and not on the EU database. The current EU database validation can however continue to be used to check EU VAT numbers.