Deal or No Deal. VAT is still changing.

Deal or No Deal. VAT is still changing

Until 29th March 2019 the UK is part of the EU and bound by its rules. Even after the 29th March many of the rules may apply to the UK. Much of this depends on the outcome of the Brexit negotiations.

In the midst of all this uncertainty the EU continues to make changes to the VAT regime. Perhaps the most significant for our industry are changes to the “e-services” rules. For VAT purposes these are electronically supplied services, described by HMRC as ‘automatically delivered over the internet, or an electronic network, where there’s minimal or no human intervention’.

Two changes that came into effect on 1st January 2019 are as follows:

VAT on e-publishing

The UK currently applies a zero rate (0%) of VAT on printed books, newspapers and magazines.

EU countries which currently zero rate (or apply a low rate) may choose to apply the same rate to equivalent electronic publications e.g. books downloaded to an e-reader.

As yet we do not know if Parliament will legislate to zero rate electronic publications. Perhaps this is because HMRC and Parliament are overloaded with Brexit related matters.

VAT on B2C e-services

Currently businesses face complications when supplying e-services to non-business customers (‘B2C’) in another EU country. The supplier must know about and charge VAT according to the rules of the country where the customer is. For example a UK business supplying an e-service to a household in France must charge French TVA.

In future, some e-services may be supplied to non-business consumers in another EU country at the domestic rate of VAT.  For example a UK business supplying an e-service to a household in France will charge 20% VAT.

This concession does not apply across the board and there are various restrictions and caps. More information can be found online.

https://www.gov.uk/guidance/the-vat-rules-if-you-supply-digital-services-to-private-consumers#defining-electronically-supplied

Postal imports

One of the plans which HMRC has in progress may affect low value imports by post.

Currently many fulfilment houses avoid paying import VAT by keeping the value low as VAT is not payable of postal imports of less than £15. HMRC are planning to end this concession if there is a ‘no deal’ Brexit. Instead foreign suppliers will have to register with HMRC and pay VAT on all packages posted to the UK. 

If you have any questions then please do not hesitate to contact us.

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