How to navigate the confusing new VAT rules post Brexit

Feeling confused about the new VAT rules post Brexit? We break down the basics and point you towards the most reliable information about the changes.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

United Kingdom leaving the European Union represented in puzzle pieces.

Image source: Getty Images

After years of Brexit negotiations, the UK has finally left the EU. It is hard to understand the impact on our everyday lives quite yet, but already we’re feeling the changes. The new VAT rules are causing some confusion, and there have been some surprises for online shoppers buying items from the EU.

We’re here to break down what the new VAT rules are and point you towards the most reliable information about the changes.

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What are the new VAT rules?

When 1 January 2021 rolled around, it wasn’t only the calendar year that changed for us living in the UK. It was the moment that the new post-Brexit VAT rules came into play.

The key difference to understand is that before Brexit, VAT was included at the point of online checkout. Now, it is being asked for at the point of delivery.

Let’s break it down further:

  • For orders with a value of more than £135, VAT will be collected at the point of delivery rather than at the point of sale.
  • Overseas retailers sending goods to the UK are expected to register for UK VAT. They will need to account for it to HMRC if the sale value is less than £135.

What does this mean?

There are different implications from the changes in the VAT rules.

For consumers

If you’ve bought something from an EU-based retailer, you can expect additional VAT charges at the point of delivery. For example, if you buy a coat from a clothes brand based in Europe, your courier company will send you a link asking you to pay the VAT for the item. This is because under the new rules these charges have to be collected by the courier firms on authorities’ behalf.

What you may find as a result is that a number of EU-based retailers have decided to no longer deliver to the UK. This is because they are now required to register for UK VAT.

As a side note, in order to avoid any other surprises when shopping online, it may make sense to use a credit card to make the payment. This just gives you an added layer of protection under Section 75 of the Consumer Credit Act. Under this protection, your card provider is jointly liable with the retailer for your purchase should anything go wrong.

For businesses

The way VAT is accounted for has changed. When it comes to importing, this VAT change affects trades with both the EU and non-EU countries.

The major difference is that Great Britain* is no longer part of the EU VAT regime. So businesses in Great Britain now need to treat EU countries like they do other countries outside the EU when it comes to VAT. This applies to goods over the value of £135.

If the value of goods is under £135, then VAT is applied at the point of sale, rather than applied as import VAT at customs. But this requires foreign sellers selling goods to buyers in the UK to register for UK VAT.

*Great Britain refers to England, Wales and Scotland. The rules are slightly different for Northern Ireland.

Where can I find more information?

The new VAT rules are confusing, so it is important to use reliable resources to find out more.

Obviously, the gov.uk website has everything you need to know. The key pages to look at are:

If you are looking for a business breakdown, then there is also a useful guide at sage.com which includes a whole section on what Brexit means for VAT in your business.

Finally, if you want to know more about what else Brexit is affecting, take a look at our articles on how to avoid falling foul of Brexit postal charges and Mastercard’s increased merchant fees for UK purchases from the EU.

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