Brexit & VAT: Key Changes for Imports, Exports and Northern Ireland

Understanding Post-Brexit VAT Rules

The UK's departure from the EU has significantly changed VAT rules for businesses trading internationally. This comprehensive guide explains the current requirements and how to maintain compliance when trading with the EU and Northern Ireland.

1. Import VAT Changes

Since January 2021, businesses importing goods from the EU must:

• Account for import VAT on goods entering Great Britain (England, Scotland, Wales)
• Use postponed VAT accounting to defer payment until VAT return submission
• Include EU imports in Box 2 of VAT returns
• Maintain detailed customs documentation (including EORI numbers)

The UK introduced postponed accounting to help cash flow, allowing businesses to account for import VAT through their regular VAT return rather than paying at the border. However, you must still complete customs declarations and may need to use customs agents depending on the goods.

2. Exporting to the EU

When exporting goods to EU countries:

• Zero-rate VAT for goods exported outside the UK
• Complete export declarations (now required for EU trade)
• Obtain proof of export within 3 months
• Understand EU member states' import VAT rules

Many EU countries now require UK businesses to register for VAT when selling goods to consumers above country-specific distance selling thresholds. The EU's Import One-Stop Shop (IOSS) can simplify VAT reporting for B2C sales under €150.

3. Northern Ireland Protocol

Special rules apply for Northern Ireland under the Windsor Framework:

• NI remains in the UK VAT area but follows EU VAT rules for goods
• No import VAT on goods moving from GB to NI if staying in UK
• EU VAT rules apply for goods at risk of moving to Ireland/EU
• Different rules for processing vs. selling goods in NI

The Trader Support Service provides free guidance on NI Protocol requirements. Businesses moving goods between GB and NI should understand the "not at risk" criteria to avoid unnecessary VAT charges.

4. Services and Digital Trade

VAT rules for services have also changed:

• Place of supply rules now treat EU as "third country"
• UK businesses no longer use EU VAT MOSS scheme
• New UK VAT MOSS system for digital services
• Different rules apply for B2B vs B2C services

For digital services to EU consumers, UK businesses may need to register for VAT in an EU member state or use the non-Union MOSS scheme if below the €10,000 annual threshold.

5. Practical Compliance Steps

To ensure Brexit VAT compliance:

1. Review all EU supply chains and update processes
2. Register for necessary VAT schemes (IOSS, UK MOSS)
3. Train staff on new documentation requirements
4. Implement systems to track NI protocol goods movements
5. Consider customs warehousing to defer VAT payments
6. Review Incoterms used in contracts with EU partners
7. Audit VAT position quarterly during transition