VAT after Brexit still matters for UK businesses that buy from, sell to, or trade with customers in the EU. If your business sells goods, services or digital products, the VAT treatment depends on what you sell, where your customer is based, and whether the customer is a business or a consumer. Getting this wrong can affect pricing, paperwork, cash flow and compliance.

This episode helps business owners understand the main VAT after Brexit issues without getting lost in jargon. We look at imports, exports, place of supply rules, reverse charge, digital products, VAT MOSS and the practical questions you need to ask before selling into the EU.

Why VAT after Brexit still matters for UK businesses

Brexit changed how UK businesses deal with VAT when trading with the EU. The EU no longer treats the UK as a member state, and that means goods moving between the UK and EU are now treated differently from how they were before Brexit.

However, VAT itself did not disappear. The UK still has a VAT system, and VAT remains a major part of the tax landscape. Therefore, the practical question is not whether VAT still exists. The real question is how your business should deal with VAT when goods, services or digital products cross borders.

If you need a wider introduction to VAT, our guide to Value Added Tax and your business explains how VAT affects pricing, registration and profit.

The two VAT questions every business should ask first

Before we look at the VAT treatment, we need to ask two important questions.

• Does your business sell goods, services, digital products, or a combination?
• Do you sell to businesses, consumers, or both?

These questions matter because VAT can change depending on what you sell and who buys from you. A business selling physical products into the EU may face different rules from a consultant selling services, or from an online business selling digital downloads to EU consumers.

VAT after Brexit for goods sold between the UK and EU

Goods are physical items. They include food, drink, clothing, equipment, machinery, books, stock and other items we can see and touch.

After Brexit, goods moving between Great Britain and the EU are generally treated as imports and exports. That means businesses need to think about VAT, duties, customs declarations, paperwork, shipping arrangements and evidence.

When goods come into the UK from the EU, they may be treated as imports. Import VAT, duties and customs procedures can apply. VAT-registered businesses may also be able to use postponed VAT accounting, which can help with cash flow because import VAT can be dealt with through the VAT return rather than paid immediately at the border.

When goods leave Great Britain and go to customers outside the UK, they may be treated as exports. In many cases, exports can be zero-rated for UK VAT, but only where the business meets the rules and keeps the right evidence.

Why records and evidence matter for EU sales

VAT after Brexit is not only about whether VAT is charged. It is also about evidence.

If your business exports goods, you need records that show the goods left the UK. If your business imports goods, you need import paperwork, VAT statements and records that support your VAT return. Without good records, the VAT position becomes harder to defend.

This is why VAT, bookkeeping and cash flow work together. The rules affect not just tax, but also systems, pricing, admin time and the way you track your numbers.

VAT after Brexit for services

Services are not physical goods. They can include consultancy, legal services, software, training, digital services, broadcasting, telecommunications and other forms of expertise or access.

For services, the key concept is the place of supply. The place of supply rules help decide where VAT is due and who has responsibility for dealing with it.

The treatment can depend on whether you sell business to business, known as B2B, or business to consumer, known as B2C. For B2B services, the customer’s location often matters. For B2C services, the supplier’s location may matter, although there are important exceptions.

Because place of supply can be technical, business owners should not guess. The important first step is to identify the type of service, the type of customer and the country involved.

How reverse charge works for VAT on services

The reverse charge shifts responsibility for accounting for VAT from the supplier to the customer in certain cross-border transactions.

For example, if a UK business supplies certain services to an EU business customer, the EU customer may need to account for VAT locally under reverse charge. The same idea can also apply when a UK business receives services from an overseas supplier.

The reverse charge does not mean VAT becomes irrelevant. Instead, it changes who accounts for VAT and how the transaction appears in the VAT records.

For a fuller explanation, listen to our episode on how VAT reverse charging works.

VAT on digital products sold to EU customers

Digital products can include downloads, online training, e-books, PDFs, digital advertising, hosting space, software access and other electronic products or services.

Digital products can create VAT obligations even when the sale value is small. If a UK business sells digital products to EU consumers, EU VAT rules may apply based on where the customer belongs.

This can create extra admin because different EU countries may have different VAT rates and registration requirements. The old UK VAT MOSS route no longer deals with EU consumer digital sales after Brexit, so businesses need to check the current process before selling digital products into the EU.

VAT MOSS, OSS and digital sales

VAT MOSS stands for VAT Mini One Stop Shop. It was designed to help businesses avoid registering separately in every EU country where they made qualifying digital sales.

After Brexit, UK businesses could no longer use the UK VAT MOSS scheme for EU consumer digital service sales. Businesses selling digital products to EU consumers need to check whether a non-Union scheme, local registration or another current route applies to their situation.

The key lesson is simple. If you sell digital products to EU consumers, do not assume VAT is covered automatically. Check the customer location, the type of product, the platform used, and the current VAT registration route.

What UK businesses should check before trading with EU customers

• Check whether you sell goods, services, digital products, or a mixture.
• Identify whether your customer is a business or a consumer.
• Check whether the customer is in the EU, outside the EU, or in the UK.
• Review whether the transaction is an import, export, service supply or digital sale.
• Keep evidence for goods leaving the UK.
• Check whether postponed VAT accounting can help with import VAT cash flow.
• Review whether reverse charge applies to services.
• Check whether digital sales create EU VAT obligations.
• Make sure your bookkeeping system captures the right VAT information.
• Ask your accountant or tax adviser before relying on old Brexit-era guidance.

Why VAT after Brexit affects cash flow

VAT after Brexit can affect cash flow because import VAT, duties, shipping costs, customs delays and admin time all influence how money moves through the business.

If your business imports goods, paying VAT at the wrong time can create pressure. If your business exports goods, poor paperwork can cause problems with zero-rating. If your business sells digital products, unexpected EU VAT obligations can affect pricing and margins.

That is why VAT planning is not just a compliance exercise. It helps protect cash flow, pricing and profit.

FAQs about VAT after Brexit

Did VAT end after Brexit?

No. VAT did not end after Brexit. The UK kept its VAT system, and businesses still need to understand how VAT applies to UK and international sales.

Do UK businesses charge VAT on EU sales?

It depends on what you sell, where the customer is based, and whether the customer is a business or consumer. Goods, services and digital products can all have different VAT treatment.

What is postponed VAT accounting?

Postponed VAT accounting can allow VAT-registered businesses to account for import VAT on their VAT return instead of paying it immediately at import. Businesses should check whether they qualify and keep the right records.

Does reverse charge apply after Brexit?

Reverse charge can still apply to some cross-border services. It changes who accounts for VAT, so businesses should check the place of supply rules and the customer type before invoicing.

Related episodes

• Value Added Tax and Your Business: Pricing, Registration and Profit
• VAT in the UK: How It Works and How to Stay Compliant
• What Is VAT Reverse Charging? How It Works for Businesses

Key takeaway

VAT after Brexit still matters because UK businesses trading with the EU need to understand the difference between goods, services, digital products, business customers and consumers. The right VAT treatment depends on what you sell, where it goes, and who buys it.

The practical step is to map your sales before you trade. Know your product type, customer type, country, paperwork and VAT reporting route. That gives you better control over pricing, cash flow and compliance.

Plan it, Do it, Profit.

“VAT after Brexit is not just about tax. It is about pricing, paperwork, cash flow and knowing what your business needs to do before it trades.”

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Episode Timecodes

• 00:00 – Introduction to VAT after Brexit
• 00:28 – What changes for VAT from 1 January 2021
• 01:01 – Five VAT areas covered in the episode
• 01:53 – Why VAT was not abolished after Brexit
• 03:21 – UK, EU and rest-of-world VAT framing
• 04:04 – Goods, services, B2B and B2C customers
• 06:03 – Imports from the EU and VAT procedures
• 07:50 – Goods leaving the UK and exports
• 09:28 – VAT treatment of services and place of supply
• 10:45 – B2C services and important exceptions
• 11:30 – Digital products and EU VAT
• 13:01 – Registration options for EU digital sales
• 13:41 – VAT MOSS and non-Union MOSS
• 16:23 – Final recap and next steps

About the Podcast

The I Hate Numbers podcast helps business owners understand accounting, tax, finance, profit, cash flow, and business planning in a practical way. We simplify financial topics so you can make better decisions and feel more confident with your numbers.

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You are listening to the I Hate Numbers Podcast with Mahmood Reza. The I Hate Numbers podcast mission is to help your business survive and thrive by you better understanding and connecting with your numbers. Number love and care is what it's about. Tune in every week. Now, here's your host, Mahmood Reza.

VAT and your business in a post-Brexit world. What does it look like? How's it going to change? So, come the 1st of January, 2021 when the UK and Brexit are one of the same, what is going to change with VAT? Hi, folks. Welcome to episode 42 of I Hate Numbers. The show that has its mission to improve your money mindset, help your business make more money, cut through the noise and complexity of the rules and regulations, save tax, and create more time for your business.

This week's topic is on the VAT landscape and your business come 1st of January, 2021, 47 years after the UK joined the European community. There are five things I want to cover in this podcast. One, to present an overview of VAT. Will it be abolished post the 31st of December, 2020? As a heads up, the short answer is no.

Secondly, the VAT treatment of goods and services with the EU, the VAT treatment when it comes to selling digital products. So, when it comes to having downloads, if you're selling advertising spaces, selling services into the EU, how does VAT affect your business? How we deal with that, the actual mechanics, something called a MOSS scheme, which I'm going to introduce to you.

And lastly, the next steps that we need to do to get prepared for when that eventuality happens on the 1st of January, 2021. The first issue I want to address is just the general overview of how VAT is going to change come the 1st of January, 2021, and also whether VAT is likely to be abolished. Now, I raised that question as to whether VAT is likely to be abolished because VAT was introduced into the UK when we joined the EU on the 1st of January, 1973.

Fundamentally, the UK has the right, has the ability to abolish VAT. The likelihood of that actually happening is anything between zero and zero. Critically, the reason is VAT is a major tax-revenue source for the United Kingdom. It raises approximately 137 billion pounds, certainly for 2019/20. It accounts for a fifth

of the total UK tax receipts, and in common with the rest of the world, there are at least 166 countries in the world that have VAT as a system, that number is growing and around the world it accounts for a fifth of government's tax revenue. It's a very efficient system in the sense that businesses that are registered for VAT fundamentally play the part of unpaid tax collectors and administrators of the system. And also, the UK government has asserted it will maintain VAT as a system.

Having said that, what we've got to do to set in frame is that once the UK leaves the EU at the risk of stating the obvious, it will no longer be an EU country. So, in VAT terms, with your VAT goggles on, countries outside the United Kingdom, England, that's England, Scotland, and Wales, Northern Ireland has its own special trading status, will be considered the rest of the world.

The good news is, fundamentally, the principles of VAT will largely remain the same. There'll certainly be some change in systems, procedures, and paperwork that one needs to generate, but fundamentally, the treatment where the taxes added to goods and services that you supply, if you’re VAT registered, will fundamentally stay the same.

The next area I want to tackle to look at is the VAT treatment of goods and services between the UK and the EU. There are two things to take into account here. Number one, what is it that your business actually sells? Is it goods or is it services, or is it a combo? The second consideration is the type of customers that you have.

I don't mean in terms of their behaviour, I don't mean in terms of how they interact with your business, but are they businesses or are they consumers, or is it a combination of the two? Let's look at those two items first in terms of goods and services. Now, goods take their natural meaning. These are physical and tangible.

You can see them and you can touch them. Obviously, if they're light goods, you can pick them up. If it's heavy machinery, you can't. So, they have their physicality behind them. So, things like food, drink, clothes, machinery, and equipment would all be classified as goods. Services, on the other hand, are non-physical and intangible.

This would cover typically software, legal services, telecommunication, TV, radio broadcasting, and digital services. This could be you running a training company, and it could be the services you provide, either live or by nature of downloads, whether they're PDFs or videos. Having established whether your business is selling goods or services, or a combo, having then established whether you are selling B2B as it might be called, or B2C, we can then look at the VAT treatment accordingly.

Now, in terms of VAT, by the way, a business does not necessarily have to be VAT registered, but it needs to be able to be identified as a business in its own right. So, obviously a VAT number is a bit of a smoking gun. That's a good identifier. Tax references, company-registration numbers can also count. When it comes to the VAT treatment of goods,

again, we need to consider two issues. Number one, whether they're going into the EU or whether they're coming from the EU. Post Brexit, goods that arrive into the UK from the EU, and there are 27 countries that make up the EU once the UK leaves on the 31st of December, 2020, will be classified as imports.

VAT, duties, custom declarations, forms and procedures will apply to all those goods arriving from one of those 27 countries. Prior to the 1st of January, 2020 when Brexit arrives, they were known as interest-EU acquisitions and documentation wasn't required. They would not have been classified as imports.

Now, any VAT that's due on the imports will not have to be paid immediately, which is good news as far as your cash flow is concerned. There will be a scheme called the VAT-postponement scheme, and the VAT that's due on those imports will be declared and payable when you complete your VAT return.

However, if you have a premise outside of the UK where you store inventory in the EU, then EU VAT will apply, and you have to register for VAT in that country. There are no minimum VAT thresholds, by the way. So, again, if you store goods, whatever the value of those goods are, in any of the EU countries, you must register separately in each member state.

When goods come in at 135 pounds or below the seller, the vendor, or the postal service will have to declare those imports, and VAT will be payable via a new quarterly regime. Also, once registered, you'll have to comply with what's called the distance selling rules. We made reference to that in last week's blog.

I'll mention that again in the show notes, but distance-selling rules apply where you're selling goods to consumers. Now, let's have a look at the flow of goods leaving the UK to go into one of the 27 EU states. They will be classified as exports. They'll be treated as we currently do for goods going outside of the EU, and they will be outside of the scope of UK VAT.

Now, that's good news. It means you don't have to charge any VAT, you don't declare any VAT, but you must still recall the value of those sales on your VAT return. As a heads up, if your business is not currently VAT registered, then you must include these sales when you decide whether you are meeting a threshold for VAT registration.

As a heads up, that magic number is 85,000 pounds on a rolling 12-month basis. So, let's recap. We've given an overview about VAT. Will it still exist after Brexit? Short answer, yes. We've talked about goods. We've differentiated between goods and services, and we've looked at the VAT treatment of the importation of

goods from the EU. They'll be known as imports. Duties, customers declarations, procedures will apply. Any VAT due on those imports will be declared when you do your VAT return, so you don't have to pay them when they land in the UK. We've talked about goods leaving the UK. They'll be known as exports. Outside of the scope of VAT, you still have to record the value of the sales in your VAT return, but there is no VAT to pay.

Now, let's talk about services now. When it comes to services, it's slightly more challenging and slightly more complicated when we deal with services, and what we need to consider is something that's called the place of supply rules. Now, the reason we need these sets of rules here because that determines which party to the transaction takes care of paying the VAT and declaring the VAT.

And I'm going to give you the overview of what's called the general rule, and like all things in life that are tax-related, there are always exceptions. Now, the place of supply for B2B services is based on where your customer belongs. So, if I provide services from the UK to a business based in France, that's a B2B transaction and the responsibility for accounting for the VAT falls on my French customer. Typically, they apply something called the reverse-charge procedure.

They have to account for the VAT at the local rates, and typically they also claim it back. So, it’s cash neutral, but effectively they have to declare what's called the output VAT on that transaction at the local rate. On their VAT return, deduct the appropriate amount, which is the same figure. There's no cash that changes hands, but that's how it's accounted for.

Bear in mind, by the way, it goes the other way around. So, if you receive services from an overseas supplier, you will abide by reverse charge as well. Now, when it comes to B2C, that's where you are selling to a consumer. The default position, the general position is where your business belongs. So, if you are a UK business supplying services to say a German customer, that's an individual,

then the VAT by default is based on where you are located in the UK and you charge 20% VAT accordingly. However, there's a slight difference here and there are a number of exceptions, approximately 15 exceptions. Typically, the main exceptions cover things like physical property, like land, telecommunications, broadcasting,

admissions to certain sporting and educational and cultural events, and for the one that's of particular relevance to us is the provision of electronic or digital products and services. In that case, it's based on where your customer is located. Now, if you only sell B2B digital products in the EU and digital products are as they imply. So, this could be downloads of a book that you are selling.

It could be downloads of a training product. It could be providing advertising services. It could be providing hosting space. If it's B2B, there is no minimum registration threshold for VAT, when you are selling B2C, and you must charge VAT at the appropriate rate in that country. So, let's recap. When you sell B2B digital products in the EU, the good thing is there's no need to register for EU VAT. When you're selling B2C, however, that situation changes, and you must charge VAT at the appropriate rate due in that EU country, and within the 27 countries that make up the EU,

once the UK leaves, there are also varying rates of VAT that apply. The massive change post Brexit will be if you even sell one individual digital product in Europe, B2C, then you need to register and get yourself a VAT number. So, for example, if I sell digital downloads of I Hate Numbers, and someone in France bought a copy, then I need to charge them French VAT.

Now, this could be a potential challenge and a problem, and I've got two options to how to deal with that accounting. So, if I'm selling B2C to the EU, the two options are: firstly, I register in each country where I make a sale of a digital product. Now, remember, even if you only sell one product and that's it, you still have an obligation to register.

If you sell across a multitude of countries, then you must register in each one. That's certainly option number one. Now, if you're not multilingual, if you haven't got the capacity of the resources to do that and there's no logic for doing that, then obviously that's going to be quite challenging, to put it mildly. There is an alternative

and it's something that's called the MOSS scheme. Now, the MOSS scheme stands for mini one-stop shop, and in general terms, you register post Brexit with one designated EU country. You submit your return to that one individual country detailing the VAT that you charge on each of the sales. That EU representative country that you've registered with then will distribute the VAT to the respective

countries. They will take care of the return, and therefore that saves a lot of administration and a lot of pain. The last thing I want to talk about when it comes to MOSS, your business may already be in what's called the MOSS scheme. On the 1st of January, 2021, if you are already operating the MOSS scheme, the scheme will no longer apply to sales into Europe, and you must do a fresh registration

called a non-union MOSS scheme. If you've not done it before, then you've got to register for the first time. If you are currently registered for the UK's VAT MOSS scheme, then the period ending December, 2020 is the last time you can use it for B2C EU sales. Only sales made up to and including the 31st of December, 2020 can be included and you must submit that return by the 20th of January

2021. The last thing I want to deal with now is what MOSS VAT will be in a post Brexit world. Now, as I referred to early on, the MOSS scheme is fantastic in a sense of allowing non-established service suppliers to file one single return detailing which EU state you sold your digital products to, but you only submit the return to one member state.

You as a business must choose a designated member. There will be a question about which of the 27 states that you use for most UK businesses, then it's likely going to be influenced by the language of choice. So, typically if you're an English speaking country, then Ireland is likely to be your preferred choice.

Also, factors such as the ease of use of the VAT portal they were set up, the actual components, the economic state of the country. If it's a country that's very developed and very economically stable, then it's likely to be spending more resources on maintaining that VAT portal. If you happen to be French-speaking country, then obviously the French MOSS system may be the one that you choose.

Last couple of things to mention, you cannot register for VAT MOSS, unfortunately, in an EU member state before the 1st of January, 2021. The European Commission website, which I'm going to add in the show notes at the end, will give you a list. The last thing I'm going to wrap up now, let's just conclude. We talked about what VAT is, how it applies.

We talked about the VAT treatment of goods and services into and outside of Europe. We talked about the VAT treatment of services in and out of Europe. We talked about the sale of digital products, which I believe will apply to lots more businesses these days that have digital products. So, even if it's a single download, it counts and there is no minimum threshold limit,

by the way. If you sell one product into any of the EU countries, you must either register in each individual country or you set up what's called a non-union MOSS registration. If you look at the link in the show notes, there's a link to a follow-up seminar, webinar, take your pick as to which one it'll be, that I will be presenting next week.

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