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Home Brexit & VAT: Essential Updates for UK Importers and Exporters in 2025

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Brexit & VAT: Essential Updates for UK Importers and Exporters in 2025

By Team FVA Tax Saving tips and Advice

As the United Kingdom approaches the critical point of five years since nominally leaving the European Union, companies in every sector continue seeking means to navigate and cope with the ever-changing and sometimes esoteric environment of Value Added Tax (VAT) rules. The initial transition phase, which became operative in the early morning of December 31, 2020, ushered in an array of key VAT procedures and procedures, most importantly in a no-deal Brexit scenario with implications of profound impact. This detailed guidebook is specifically meant to educate and guide the requisite VAT issues that British companies should know while conducting business in the post-Brexit period so that they stay updated with the latest developments and regulatory changes up to February 2025.


The Brexit has changed the VAT landscape for companies that engage in cross-border trade. Domestic VAT has not changed, but cross-border transactions by EU member states are now accompanied by new procedures and compliance obligations. Companies should be aware of such changes to comply and maximize their tax positions.

 

VAT on Imports from the EU

 

Without any trade agreement in place, the United Kingdom treats imports from the European Union the same as it treats imports from non-EU countries. There are a few significant matters that come up and must be dealt with, such as:

 

Import VAT and Customs Duties

 

  • Import VAT: Import VAT is charged on goods imported into the UK from the EU. Import VAT needs to be accounted for by the business at the time of importation.
  • Customs Duties: Depending on the particular description and classification of the goods concerned, it is likely that customs duties would be actually levied. The rates on which the duties are levied are calculated based on the detailed framework that exists in the UK's Global Tariff schedule, which acts as the basis for determining charges payable.

 

Postponed VAT Accounting

 

In order to ease the short-term cost pressure caused by the cash flow implications of import VAT, the government of the United Kingdom has introduced a system known as postponed VAT accounting. This new system is particularly designed for VAT-registered businesses, providing them with the convenience and flexibility of accounting and then reclaiming the import VAT on the same VAT return. This is a significant departure from the previous requirement, which demanded that businesses pay the import VAT upfront and then reclaim the same at a later date. This beneficial system continues to be in effect and operation as of 2025.

 

Value Added Tax on Export to the EU

 

UK exports to EU countries are presently treated as zero-rated supplies and hence are exempt from VAT on the date of sale. However, companies must ensure:

 

  • Evidence of Export: Adequate and proper documentation to confirm that products are being exported from the UK is always retained to back the zero-rating claim.
  • Customs Declarations: It is important that there be accurate and timely customs declarations for all exports without exception. Trading with EU under new rules.

 

Changes effective from January 1, 2025

 

New EU VAT changes, effective as of January 1, 2025, have introduced additional issues for UK businesses:

 

  • Place of Supply for Virtual Services: The European Union has undertaken a fundamental reform of the place of supply rules, specifically with the intention of business-to-consumer (B2C) services. This adjustment is particularly for services in virtual events, courses, and other such kinds of services that are increasingly being held in the digital space. According to the new rule, such services will now be taxed according to the location of where the consumer just so happens to be in the EU, as opposed to the prior taxation where the location of where the supplier just so happens to be. Thus, UK-based companies offering such services to the consumers of EU member states are required to register under Value Added Tax (VAT) in those EU member states. As an alternative, they may choose to utilize the One-Stop Shop (OSS) regime, which is intended to simplify and enable ease of compliance with the requirements of these new charges. EU VAT rules.

 

Value-Added Tax on Services from the EU and UK

 

The VAT treatment of services has been altered since Brexit:

 

  • Business-to-Business (B2B) Services: As per the general place of supply rules that have been introduced, it should be observed that services supplied to businesses within the European Union (EU) are typically deemed to be outside the UK Value Added Tax (VAT) jurisdiction. It should be observed, however, that the reverse charge mechanism can be effective in the recipient's state, and the EU business may therefore be required to charge VAT in line with local rules.
  • Business-to-Consumer (B2C) Services: For B2C services that are rendered to consumers that are based within the European Union, the basic principle is that the place of supply is normally where the consumer is based. Within this situation, UK companies that provide such services can be asked to register for Value Added Tax (VAT) within the relevant member state where the consumer is based in order for them to comply with the local VAT regulations and meet their obligations as such. Check VAT registration. 

 

E-commerce and Distance Selling

 

The European Union's VAT package on e-commerce, effective from July 1, 2021, introduced several significant changes that have a direct bearing on United Kingdom businesses:


  • One-Stop Shop (OSS): This program in particular is of huge benefit to non-EU companies, as it allows them to register in just one EU member state. In this manner, they are able to effectively report and remit Value Added Tax (VAT) on their distance sales of goods to be resold to consumers within the European Union. In particular, UK firms have the option of benefiting from the OSS program, which functions to greatly reduce the complexity of VAT compliance within the different EU states.
  • Import One-Stop Shop (IOSS): For shipments of up to €150, the IOSS streamlines the collection, declaration, and payment of VAT at the point of sale, simplifying things for businesses and consumers alike.

 

Northern Ireland Protocol

 

There are special VAT rules under the Northern Ireland Protocol:

 

  • Goods: Northern Ireland remains subject to the EU VAT rules for goods. That is, goods exported from Great Britain to Northern Ireland are treated as exports, while goods supplied from Northern Ireland to the EU are treated as intra-EU supplies.
  • Services: In Northern Ireland, the VAT treatment of services is uniform and in line with procedures in the remainder of the United Kingdom, as it rigidly follows the UK VAT rules established.

 

Administrative Considerations

 

Post-Brexit VAT compliance entails a sequence of administrative changes:

 

  • VAT Registration in the EU: Depending on the particular nature of their business activities and operations, UK businesses will be required to undergo the VAT registration process in one or several of the EU member states. Maintaining tax records properly is crucial in post-Brexit VAT compliance. Businesses need to ensure they adhere to Making Tax Digital (MTD) regulations in VAT record-keeping. Further reading on MTD and tax record-keeping.
  • Fiscal Representation: Certain EU nations make non-EU firms place a fiscal representative who will manage VAT on their behalf. The representative will become jointly and severally responsible for paying the VAT, adding complexity and potentially expense.
  • Customs Procedures: Tighter customs declarations and potential examination necessitate robust internal procedures to manage compliance and avoid delays.

  

Recent Developments and Future Outlook

 

As of February 2025, the following are some of the notable developments:

 

  • EU VAT in the Digital Age (ViDA) Initiative: The European Union is making huge strides with its ambitious ViDA reforms, which are built with the aim of reconfiguring the current VAT reporting mechanisms and preventing fraudulent cross-border transactions associated with it proactively. These pioneering changes involve the compulsory e-invoicing, and the compulsory real-time electronic reporting on cross-border transactions between member states. It would be critical for United Kingdom businesses undertaking trade activities with the European Union to keep these under close watch, as they could have long-lasting implications for future compliance requirements that might arise.

 

Conclusion

 

For UK companies, survival under the post-Brexit VAT system calls for awareness and flexibility. Although all basic concepts are the same, companies dealing in cross-border commerce need to remain updated with new regulations and compliance schemes. Application of VAT specialists and technology-driven solutions can prove useful in managing VAT.

Need VAT Expert Guidance? Ring Fair View Accountants If you find yourself in a situation where you require expert and professional advice on VAT compliance, import/export regulations, or creating efficient financial planning strategies, you need look no further than Fair View Accountants, as we are more than qualified to help you. As a highly experienced and established company that specializes in providing full accounts services in Watford, we are dedicated to delivering personalized solutions that are specifically designed to meet the particular needs of businesses of all shapes and sizes, from small start-ups to big corporations. We invite you to call us today for a free consultation, which will allow you to see how we can assist you, and to ensure that your business can continue to achieve VAT compliance goals in the new climate of a post-Brexit world.

 

FAQs

 

Will Brexit affect VAT rates in the UK?

No, the UK's standard VAT rate remains 20%.

 

Do UK businesses still need an EU VAT number?

Only where they need to register for VAT in an EU state under local legislation.

 

What is postponed VAT accounting?

A system to allow UK firms to defer paying import VAT and invoice it on their VAT return.

 

How do customs declarations impact VAT?

Customs declarations are required for all UK-EU trade, affecting how VAT is calculated and reported.

 

Are UK businesses required to register for IOSS?

Only if they sell low-value goods (under €150) to EU consumers and wish to collect VAT at the point of sale.

 

Can UK businesses still zero-rate exports to the EU?

Yes, provided they have proof of export.

 

Is VAT charged on services supplied to the EU?

It depends on the type of service and whether it is B2B or B2C.

 

What VAT changes are expected in 2025?

The EU's ViDA initiative can bring real-time reporting and e-invoicing requirements.

 

Does Brexit impact VAT on digital services?

Yes, UK businesses are required to register now in an EU member state under the OSS regime for B2C online sales.

 

Where can I get expert VAT advice?

Consult professional advice from Fair View Accountants.