As announced earlier this summer, the UK Government has now published the first batch in what is expected to be a series of over 80 Brexit 'no deal' technical notices. The 25 notices contain information about some of the potential impacts of a 'no deal' scenario for citizens and businesses in the UK, and identify steps that could be taken to mitigate those. Our briefing on the Government's approach to no-deal planning is available here. The EU published its own 'preparedness notices' earlier in the year.

The UK's 'no deal' notices cover a wide range of issues. Some of the notices are specific to particular industries or sectors, while others will be relevant more generally. This update covers the guidance issued by HMRC on how VAT will work for businesses in the event of a 'no-deal' Brexit.

HMRC's Guidance

The guidance confirms that even though VAT is a European tax, the UK will continue to have a VAT system after it leaves the EU, as the revenue from VAT is a vital source of government revenue. The VAT rules relating to UK domestic transactions will continue to apply to businesses as they do now.

In the event of a no deal, however, there are various implications for businesses importing goods and services from, and exporting goods and services to, EU countries. If there is no agreement on Brexit then there will be no transition period, and so the new VAT arrangements would apply from the point the UK left the EU at 11pm on 29 March2019. The VAT-related issues identified in the guidance are summarised below.

Accounting for import VAT on goods imported into the UK _ postponed accounting

In the event of a no-deal Brexit, the guidance states that the UK Government would introduce postponed accounting for import VAT on goods brought into the UK. UK VAT-registered businesses importing goods to the UK would be able to account for import VAT on their VAT return, rather than paying import VAT on or soon after the time that the goods arrive at the UK border.

The confirmation that postponed accounting would be introduced is really welcome, as it would significantly reduce the compliance burden for businesses importing goods from EU countries. To ensure that imports from EU and non-EU countries are treated fairly, the guidance indicates that postponed accounting would apply to imports from both EU and non-EU countries. This is not currently the case, as VAT on goods imported from non-EU countries can only be deferred by setting up a VAT deferment account.

VAT on goods entering the UK as parcels sent by overseas businesses

VAT would be payable on any EU goods entering the UK as parcels. Under EU VAT law, Low Value Consignment Relief (LVCR) currently applies to parcels from non-EU countries up to £18, so they are VAT-free on import. As announced in the Customs Bill White Paper (published in October 2017), LVCR will not be extended to goods entering the UK from the EU. In a 'no deal' scenario, LVCR will no longer apply to any parcels arriving in the UK, whether from EU or non-EU countries. This means that all goods sent by overseas businesses will be liable for VAT.

For parcels valued at no more than £135, the guidance states that a "technology-based solution" would allow VAT to be collected from the overseas business selling the goods into the UK. Overseas businesses would then charge VAT at the point of purchase and would be expected to account for VAT via an HMRC digital service.

For goods worth more than £135, VAT would be collected from UK recipients in line with the current procedures that apply to parcels from non-EU countries. Guidance on these procedures can be found here.‰ÛÜ

VAT on vehicles imported into the UK

Businesses should continue to notify HMRC about vehicles brought into the UK from abroad, as they do now. The Notification of Vehicle Arrival Procedures (NOVA) system would continue to be used for this purpose, but VAT may be payable on vehicles imported from EU countries in some circumstances.

UK businesses exporting goods to EU consumers

Distance selling arrangements would no longer apply to UK businesses in a no-deal scenario, and UK businesses would be able to zero rate sales of goods to EU consumers. EU Member States would treat goods from the UK in the same way as goods from other non-EU countries, with import VAT and customs duties due when the goods arrive into the EU.

UK businesses exporting goods to EU businesses

VAT registered UK businesses would continue to be able to zero-rate sales of goods to EU businesses, but would not be required to complete EC sales lists and would have to retain evidence to prove the goods had left the UK.

Individual EU Member States may have different rules on import VAT for non-EU countries, and payments may be due at the border. The notice recommends that UK exporters check the import VAT rules in the EU Member State to which they would be sending goods.

UK businesses selling their own goods in an EU Member State to customers in that country

UK businesses that have goods stored in an EU Member State at the point of Brexit would be able to continue to sell those to customers in the EU. UK businesses would continue to have to register for VAT in EU Member State(s) where they make sales in order to account for the VAT due. The guidance points businesses to the Commission's website for the rules on storing 'non-Union' goods and registering for VAT in Member States.

UK businesses supplying services into the EU

The guidance notes that VAT rules on 'place of supply' will continue to apply in broadly the same way they do now, with some potential changes.

For digital services supplied to non-business customers in the EU the 'place of supply' will continue to be where the customer is resident, and VAT on services will be due in that Member State.

However, input VAT deduction rules for financial services supplied to the EU may change. The guidance states that HMRC will update businesses with more information in due course.

The Tour Operators Margin Scheme

The Tour Operators Margin Scheme is an EU VAT accounting scheme for businesses that buy and sell on certain travel services that take place in the EU. It will no longer be available if there is a no-deal Brexit, and this will cause administrative issues for all those businesses which use it. The note confirms that HMRC is engaging with the travel industry to minimise any impact of the TOMS no longer being available.

UK businesses using EU-wide VAT IT systems

In a no-deal situation the UK would stop being part of EU-wide VAT IT systems, such as the VAT Mini One Stop Shop (MOSS). Businesses that sell digital services to consumers in the EU would no longer be able to use the UK's MOSS portal to report and pay VAT on sales of digital services to EU consumers. Instead they will be able to register for the VAT MOSS non-union scheme that operates in EU Member States. This can only be done post-Brexit but, as the scheme requires businesses to register by the 10th day of the month following a sale, businesses would have to register by 10 April 2019 for any sales immediately after Brexit in March 2019, and by 10 May 2019 for sales made in April 2019.

EU VAT refund system

UK businesses will continue to be able to claim refunds of VAT from EU Member States but would no longer be able to use the EU VAT refund system. Instead, UK businesses would need to use the existing processes for non-EU businesses. These processes vary across the EU, so businesses would need to make themselves aware of the processes in each country where they incur costs and want to claim a refund.

EU VAT registration number validation

UK businesses will be able to continue to use the EU VAT number validation service to check the validity of EU VAT registration numbers. The guidance states that HMRC is developing a service so that UK VAT numbers, which would no longer be part of the EU validation service, can continue to be validated.

Businesses in Northern Ireland importing from and exporting to Ireland

The guidance states that more information on VAT and the Irish border "will be provided in due course", and in the meantime recommends that businesses that trade across the land border consider whether they need advice from the Irish government on what preparations would be required. This is further confirmation, if it were required, that the Irish border is one of the most difficult areas to resolve.


With the UK's withdrawal from the EU getting closer, businesses should prepare for all possibilities. There are a number of VAT implications of a no-deal Brexit, which businesses will have to start planning for if they are to be ready to deal with them from 29 March 2019, if required.

Confirmation that postponed accounting will be available for businesses on all imports of goods from both EU and non-EU countries is a welcome development, though more information is needed about the detail.

We will produce further detail on VAT developments in due course, so keep an eye on our Brexit Hub.