The true result of Brexit is yet to be seen, but one thing is for certain, when Article 50 is triggered almost every aspect of economic life will change. Trading relationships will alter and the Government will have complete control over UK taxation.
Currently, VAT (Value Added Tax) is charged on taxable supplies made in the UK by ‘taxable persons’.
All businesses with a taxable turnover above £83,000 must be VAT registered. Once this threshold is reached, a company will need to collect and pay VAT, submit quarterly returns and comply with VAT accounting rules.
Businesses that sell e-services to consumers in the EU must also register for VAT MOSS (Mini One Stop Shop), meaning they don’t have to register with separate EU countries.
At present the standard rate of VAT in the UK is 20% and this applies to most goods and services. A reduced 5% VAT rate applies to certain items such as home energy and heating equipment as well as zero-rate VAT on essential items.
UK VAT rules are a result of European law; however once we leave the EU, the Government will take full control of VAT policies, for example:
• Standard VAT rate – EU law prevents members from lowering this below 15%, yet all could change once out of the EU
• VAT exemption – Leaving the EU will allow the Government to introduce zero-rate VAT on entire industries as well as specific goods and services
• Different VAT rates – The Government could also introduce separate VAT rates for different services
The way in which VAT is reported may also change because of the reintroduction of economic borders between Europe and the UK, which will affect each sector differently.
Devolution of powers
Current EU rules prevent member states from having multiple VAT rates, yet Britain’s exit of the EU could see the devolution of VAT powers to Scotland. A Scottish think tank has argued that they should have complete control and with a possible second Scottish Independence referendum still to come, this remains a possibility.
To discuss how your business could be affected, contact your local office.