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Although it was clear VAT would be impacted significantly by Brexit, the prolonged exit negotiations and the last minute “deal” with the EU, alongside the pandemic, all conspired to mean that there wasn’t a great deal of time to prepare for VAT issues.

Its fair to say EU trading and VAT is now a confused environment.

Its worth bearing in mind that there are now two completely separate forms of VAT – UK VAT and EU VAT.  Pre Brexit the UK was part of the EU VAT system and enjoyed inter EU VAT treatment.  Now we are a third country as regards the EU VAT regime – the fact that the UK also has a VAT regime is irrelevant.

Into the mix comes a new set of EU rules from 1 July 2021 around importation of low value goods into the EU, and the creation of a new “Import One Stop Shop” (“IOSS”) for imported goods into the EU with a value of Eur150 or less.

It also worth bearing in mind there are separate regimes as regards both UK and EU VAT for:

  • Import / Export of Goods
  • Cross border supplies of services
  • Cross border supplies of digital services

As regards UK businesses generally, there are few changes for trading with the rest of the world, but trading with the EU requires a review of your VAT compliance.  In some instances there is no threshold for EU VAT meaning even one small supply into the EU is subject to VAT.