UK / EU Vat on Exports to EU post-Brexit (if sale takes place before Brexit)

Discussion in 'International Business' started by Woody19, Aug 30, 2019.

  1. Woody19

    Woody19 UKBF Newcomer Free Member

    5 2
    Does anyone have an inkling of what the VAT rules might be on goods sold BEFORE 31st October to customers in the EU (retail customers so no EU TVA/ VAT numbers involved here) where those goods will be delivered AFTER the 31st October? Aka where there is a delay between purchase and delivery which spans the Brexit deadline date (in the case of no deal).

    Our business makes custom furniture which takes 6 weeks to be made, and is then sent from the UK to the customer. We have been exporting to the EU and elsewhere for a few years now so I know all the current VAT arrangements for sales to retail customers (aka not businesses with EU VAT numbers). It's pretty clear that a no deal Brexit would result in import VAT/TVA (or whatever sales tax is applied in the recipient country) being charged to the EU recipient post Brexit, as it is in Canada, Australia, Switzerland etc. We're set up for that and can manage that fine once we know which way it's going to go.
    My concern is that with 9 weeks to go my EU customers (about a 1/3 of sales) will dry up right in the middle of the busiest time of the year while they wait for clarification on whether they'll be charged extra when it's delivered.

    It would help greatly to be able to give prospective customers some reassurance but I have asked this "goods sold before, delivered after" question to our local DTI representative and got a email sending me to a generic .gov website, which doesn't have any info at all about this conundrum. "Sold before, delivered before", and "sold after, delivered after" are pretty straightforward-ish, but it doesn't answer my question.

    I am considering putting a notice on our website to reassure customers that if there is any import VAT/ TVA then we will cover it- presumably if VAT is charged to the customer at the receiving end we would be able to reclaim the VAT on the sale at this end, but this could be a risky approach and we could end up liable for VAT on the sale AND the import VAT at the customer end.

    Advice welcome- especially from seasoned exporters / accountants who might have pre-empted this question!
    Posted: Aug 30, 2019 By: Woody19 Member since: Jul 23, 2019
  2. Mike Foulds

    Mike Foulds UKBF Contributor Free Member

    38 12
    Hi Woody.

    Please note some new advice on this subject has been published on the website on the 30th August. If you search the website for:
    VAT for businesses if there’s no Brexit deal

    This should answer your questions.

    (Sorry, it won't let me post the actual link!)
    Posted: Sep 2, 2019 By: Mike Foulds Member since: Mar 21, 2018
  3. Woody19

    Woody19 UKBF Newcomer Free Member

    5 2
    Thanks for that- there's lots more info than the last time I looked! It still doesn't cover the issue of what happens if the sale takes place under current VAT rules, but the delivery takes place under different rules post-Brexit when it may be subject to additional import VAT/ customs duties payable by the recipient. All I can find is:

    "If the UK leaves the EU without an agreement, distance selling arrangements will no longer apply to UK businesses and UK businesses will be able to zero rate sales of goods to EU consumers.

    Current EU rules would mean that EU member states will treat goods entering the EU from the UK in the same way as goods entering from other non-EU countries, with associated import VAT and customs duties due when the goods arrive into the EU."

    It wouldn't be too much of an issue if the goods we sell were stock items with only a few days delay between sale and delivery. It's only concerning me because there's a 6 week lead time during which the current position is the likelihood of the goods being subject to UK VAT on the sale and subject to EU VAT at the point of delivery. During this time we're likely to lose a lot of business if we can't reassure prospective customers that they won't have a surprise import VAT bill to pay.
    Posted: Sep 2, 2019 By: Woody19 Member since: Jul 23, 2019
  4. Import Expert

    Import Expert UKBF Regular Free Member

    321 133
    EU Import VAT would become applicable at the point the goods enter the EU from the UK, so doesn't matter if the sale was agreed prior to this (Prior to 31st October)
    Posted: Sep 2, 2019 By: Import Expert Member since: Feb 1, 2012
  5. Woody19

    Woody19 UKBF Newcomer Free Member

    5 2
    Thanks, and yes, I have just had confirmation from technical advisers at HMRC that the most likely scenario (nobody really knows though) is that the goods will be liable for VAT at the point of sale AND at the point of import to the EU, so they'll end up being taxed twice unless each country decides to have their own "grace period". Which isn't likely.
    So the solution may be to defer the point of sale by taking a deposit payment, then credit it as a refund against a new invoice that we raise after the 31st October. Convoluted but compliant as far as I can tell..
    Posted: Sep 2, 2019 By: Woody19 Member since: Jul 23, 2019