The legislation around Brexit is far-reaching.

So to help guide you through the complexities, we’ve created this guide to break it down.

We’ll be focusing on the key information digital services you need to know within the tax and VAT legislation.

However, most of the changes affect the import and export of goods.

Legislation around this has additional complexities.

As MAP clients are focused on services, we highlighted the key areas we think are most relevant.

Otherwise, you can find technical guidance on imports and exports here

VAT Changes after Brexit

  • EC Sales lists will not be needed. Also, final returns to 31st December 2020 need to be submitted in January 2021.
  • The provision of services to the EU – B2B services
    You should keep evidence of your customer being outside the UK and being a registered business (VAT or tax ID typically.) As such, you will not need to charge VAT and invoices in Xero will be coded as zero-rated.
  • Purchases of services from the EU
    The reverse charge rules still apply to services received into the UK. As the place of taxation is where the recipient has their business establishment. From a practical point of view you should code services from outside the UK in Xero as ‘Reversed Charge Services (20%)’.
  • UK digital product sellers will no longer be members of VAT MOSS Scheme
    This impacts digital sales to non-business customers (B2C sales of music, games, software etc). Therefore, businesses will now have to re-register for MOSS in the EU. And separately in the UK under a regular VAT return if not already registered.
  • The provision of other services (non-digital) to the EU – B2C services
    Changes are due from 1st July 2021. Though previous rules where UK VAT would be charged in full on B2C services in the EU still apply. From 1st July 2021 additional services will be added to the VAT MOSS scheme. So, if you sell to non-business customers we would urge you to consider these implications and get in touch for support.

Post-Brexit Tax implications for payments of interest, royalties, copyrights, and patents

From 1 January 2021, some EU countries may start to deduct tax from interest, royalty and dividend payments made into the UK.

There are added complications to consider. Tax treaties are being drawn up between different EU countries. ‘Withholding tax’ charges are dependent on the country you may be working with. However, you can usually apply for full or partial exemption. Or you can claim back some or all of the tax you have already paid under the relevant double taxation agreement. In addition, you may need to submit a new or revised claim to the tax authorities of the EU country.

If you anticipate any impact and would like specific tax advice around this we can assist.

We will review your businesses’ payments and receipts, exposure to taxes and available mitigations from the new year.

Technical guidance is available here.

Considerations of non-accounting implications

The legislation around Brexit is far-reaching and not all is within our field of specialism. However, we wanted to highlight areas which we think may directly impact some of the businesses we work with:

  • Work Visas. Although there will be some provisions for travel to work meetings. So, if you are planning any travel to Europe for work purposes it will be important to know how the rules affect you.
  • Paying VAT on the import of equipment. You can claim this back through your VAT Return if you have all the documentation including a form C79. Companies are already experiencing delays due to the added paperwork. 
  • EU domain names registered in the UK. Check the government guidance if you hold domains in the EU here. 
  • Personal data legislation has changed but the Brexit agreement contains a bridging mechanism allowing the continued free flow of information from the EU to the UK for 6 months. Data transfers from the UK are not affected but the ICO website (Information Commissioner’s Office) has more guidance on rules around personal data protection.

Further Guidance for your business after Brexit

For more information on Brexit, the government website has a dedicated page here.