The influence of Brexit on VAT

The United Kingdom is no longer a part of the European Union. In everyday life most people will not really be affected by this. There will however be some changes for entrepreneurs.

For taxes the UK will have the same status regarding the Netherlands as for instance Norway: it’s Europe, but not EU. In this article you can find the most important consequences Brexit will have for creative freelancers.

Purchasing goods from the UK

As of January 1st 2021 you will have to declare and pay VAT to Customs to import goods for your company from the UK. This is Dutch VAT that can be recovered by your VAT return, just like the VAT you recover for goods you buy in the Netherlands. When you own a bike shop for instance and you have bike parts send to you from the UK. Dutch customs will charge VAT over these goods.

Delivering goods to the UK

But when this bike shop owner sells a bike to someone in the UK, it’s different. He’s now delivering goods to someone in the UK and that means as of January 1st 2021 it’s a delivery outside the EU. The goods are leaving the EU and therefore he charges 0% VAT

Delivering services or purchasing services in the UK

Before Brexit you could reverse charge VAT to your client and the other way around. Since the UK is no longer a part of the EU, this is no longer possible. You can use this tool by the Tax and Customs Administration (Belastingdienst) to find out what’s relevant for your situation. In the tool you indicate it’s regarding a ‘non-EU country’. Of course you can always contact your bookkeeper if you have any questions.

The MOSS scheme

The UK leaving the EU will also have consequences for those using the MOSS scheme (mini one stop shop scheme). As of January 1st 2021 you can no longer use this scheme for the UK. As of 2021 you need to contact the tax authorities in the UK to declare and pay VAT. The MOSS scheme can of course still be used when you deliver digital services to private individuals in other EU countries. For the fourth quarter of 2020 you can still handle the VAT for the UK in the usual way, using the MOSS scheme. You have until 20 January 2021 to do so. Corrections over time periods until this quarter can be filed until 31 December 2021 at the latest. If you have any questions please contact your bookkeeper.

How about Northern Ireland?

Northern Ireland has a separate status in the UK. When it comes to the VAT for delivering goods it will still be regarded a EU member. But keep in mind, when it comes to services, this separate status does not apply. Northern Ireland is not considered an EU member when it comes to services. The VAT can only be reverse charged when it’s for goods. In that case you need the VAT number of your client to file an ICP declaration with the Tax and Customs Administration (Belastingdienst).