VAT News

Brexit Takes Center Stage at Downing Street Meeting

Brexit took center stage again in meetings at Downing Street between recently elected UK Prime Minister Boris Johnson and Ursula von der Leyen, the president of the European Commission. 

Johnson stressed that his immediate priority was to implement the withdrawal agreement by January 31st. They also discussed the progress of ratification in the UK and in the European Parliament.

He said the UK wanted a positive new UK and EU partnership, based on friendly cooperation, a shared history, interests and values. 

Johnson reiterated that the UK wanted a broad free trade agreement covering goods and services, and cooperation in other areas. 

An area that impacts the ease and movement of goods and services between the UK and EU is the changes in VAT legislation that will need to be made. This will affect both UK and EU businesses. 

The most significant change for businesses to start considering is the effect Brexit will have on Imports and exports within the realm of VAT and customs duties. 

Up until now, goods have managed flow freely between the UK and EU with an exemption on import VAT. Now that the UK will exist outside the European Union, anything being exported or imported between Europe and the United Kingdom may be subject to VAT. This means UK businesses may need to VAT registrations throughout Europe or may need to withstand lengthy VAT reclaim processes.

The jury is still out on how the UK will treat services when billing European clients. It may be that the considerable 20% UK VAT will have to start being charged on all service invoices which might make the United Kingdom a less attractive option for European businesses to seek suppliers. 

The meeting between Johnson and van der Leyen ended with Johnson making it clear that the UK would not extend the Implementation Period beyond 31st December 2020; and that any future partnership must not involve any kind of alignment or ECJ jurisdiction. 

Johnson said the UK was ready to start negotiations on the future partnership and Canada-style FTA as soon as possible after January 31st.

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