Some of the key changes relating to businesses in Great Britain and their implications on the running of their business are outlined below. Please note however that businesses in Northern Ireland are subject to a new NI protocol and that the rules below don't apply to them.
VAT Returns
Boxes 8 and 9 were used for reporting sales of goods to, and purchases from the EU, so those will no longer be required for transactions from 1st January 2021 onwards. You will however need to report any transactions which took place prior to 1st January. These boxes will eventually be removed from the VAT return format.
Box 2 was used for reporting ‘acquisition tax’ on goods bought from EU VAT registered businesses. From 1st January this box will only be used by businesses in Northern Ireland who buy goods from the EU.
Service supplies
Business to Business (B2B) supplies of services
The general rule is that the place of supply is where customer belongs and that does not change. So treatment of these sales will remain the same.
- EU customers will continue to account for local VAT in their own countries via the Reverse Charge.
- EU suppliers will continue to supply their services to UK businesses free of any VAT. UK businesses must continue to account for reverse charge VAT on receipt of these services.
Business to Consumer (B2C) supplies of services
The general rule is that the place of supply is where the supplier belongs and that does not change either. So UK VAT will continue to apply (note there are some exceptions to the general rule).
There is an another exception for businesses making B2C supplies of digital services as the current threshold of £8,818 no longer applies from 1st January (see below for more details).
Goods sold to the EU
Goods sold to a EU customer will now be reported as zero rated sales - regardless of whether the customer has an EU VAT registration number or not.
UK businesses who sell to non-VAT registered EU individuals will need to consider whether they or their customer will be responsible for paying EU VAT when the goods arrive in the EU. This must be made clear to the purchaser in the terms and conditions of sale. If the UK business is responsible then it will need to register in the relevant EU countries.