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Friday, 30 August 2019

When Brexit happens, what happens to VAT?

We're being told to prepare for a no-deal Brexit, and my current thinking is that the most likely scenario is that we will blunder out on October 31 with no deal. So, I'm trying to prepare.

Currently, when I sell to a customer in Germany, I charge him VAT at the rate of 19% (that being the German rate, other countries each have their own VAT rate). I send that tax to Germany once per quarter, via a thing called the "Union VAT MOSS" scheme.

So the first question is, do I charge German customers VAT in the event of a no-deal Brexit. I phoned HMRC on 0300 200 3700. I spoke to a guy there who knew VAT, but not Brexit, and he said "It depends". So I interrupted him and said "No, it doesn't, I'm talking about a no-deal Brexit, so it doesn't depend on a deal". So then he said, "If there's no deal, then UK businesses have no obligation to charge VAT to EU customers. It's just like Canada or China. I think." He wasn't certain; he's had no official guidance on this. But he thinks there will be a hotline for this sort of question (and that will be saturated as soon as it opens) and a web site.

The second question is more complicated. On October 31, the "Union VAT MOSS" scheme ends. But I will have dutifully charged EU members VAT until October 31. I'm next due to pay VAT just after December 31st, so I wont be able to pay my EU VAT via the "Union VAT MOSS" scheme.

I'll have to join  the "non-Union VAT MOSS" scheme, which means I have to sign up at some foreign country (maybe Germany, or Ireland?) in order to pay that remaining month of VAT. Wouldn't it be nice if the "Union VAT MOSS" scheme stayed open until, say, January 31 2020? But I doubt if anyone has made any plan for this.

So, I have no idea, neither does HMRC, nor does anyone else.

And what about the other EU countries. What will happen when I suddenly stop sending them the VAT that I've been sending them each quarter. Will they start sending me letters asking for their money, money which I don't think they are due? Are they ready for the change on October 31?

Omnishambles.

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