We are sure that you will all be aware of the BREXIT result by now!

The changed VAT landscape will begin to emerge after Article 50 of the Lisbon Treaty has been triggered (which we can expect to happen after the election of the new Prime Minister sometime in October).  There will then be a renegotiation period of up to two years when the UK and the remaining 27 EU member states will agree separation terms and negotiate new compliance trading terms. Until that negotiation is concluded, all existing EU VAT rules will apply to UK businesses and consumers.

Currently, the VAT Act 1994 is an implementation of the EU VAT Directive, on completion of the exit negotiations, the UK will no longer be required to follow the EU VAT Directive; or European Court of Justice Rulings. Instead the UK’s VAT Act will take supremacy. We will have to wait and see whether CJEU rulings will continue to influence UK court decisions.

In addition, the UK will no longer be constrained by the EU VAT Directive on setting its VAT rates. Current EU rules set a minimum 15% standard rate; and only two reduced VAT rates, which must be 5% or higher. This will mean that the UK government can decide VAT rates, for example, on key items that have featured in the news over the past few months, such as domestic fuel and women’s sanitary products.

The biggest changes are to be expected in how sales of goods and services between businesses within the member states are treated; there will be swathes of new compliance that we will, of course, keep you updated with as they happen.

Published: 06.24.16 - Posted In: VAT News