European Union: Preparing For A Hard Brexit: VAT For Businesses If There Is No Deal

Last Updated: 11 September 2018
Article by Christine O'Neill, Charles Livingstone, Hannah Frahm and Isobel d'Inverno

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 May 2019. 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.

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.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions