VAT – General
The EU VAT Directive and other directives would no longer be binding in the UK post-Brexit. Although the relevant EU directives have been transposed into UK domestic law, and would continue to apply after Brexit, the latter may be replaced post-Brexit by a simplified UK sales tax system, which would result in incompatibility between UK and EU law.
Since VAT accounts for about 20% of the UK’s national tax revenue, we do not expect the UK to fully abolish the existing system inside its own borders.
Companies should monitor events carefully so that they are aware of any specific developments and action required in the UK (e.g. extending tax exemptions or abolishing exemptions).
European case law and legislation will no longer be a reliable guide for businesses supplying or purchasing goods and services to or from the UK post-Brexit.
VAT – Intra-Community supplies of goods and services
Post-Brexit, supplies of goods and services crossing the UK–EU border will no longer qualify as intra-Community supplies.
The consequences will vary depending on the individual business, but there will generally be increased bureaucracy.
As the VAT regime for intra-Community acquisitions and supplies will no longer apply, supplies of goods and services from and to the UK will qualify as importations and exportations respectively. Businesses will need to comply with customs formalities for goods crossing the UK–EU border.
Companies should consider the specific impact of Brexit on their transactional chain of goods and services in order to plan and, as early as possible, implement any necessary measures and reconfigure their business processes.