Following latest no-deal Brexit VAT guidance from HMRC UK businesses should act now to avoid missing VAT refunds, according to RSM accountants.

With the UK’s withdrawal from the EU just around the corner and a no-deal Brexit very much still a possibility, Andy Ilsle, indirect tax partner and George Bull, senior tax partner at accountants RSM have highlighted HMRC guidance on some of the practical challenges that could face UK businesses. These include reclaiming VAT from EU member states; VAT registration issues for consumer businesses selling digital services to the EU; and how to verify UK VAT registration details. Affected businesses must act now, the experts say.

Bull says: “If the UK leaves the EU without a deal, from 11pm GMT on 29 March 2019 many UK businesses will need to apply the same processes to EU trade that apply when trading with the rest of the world.”

While conceding that HMRC is going as far as it can to help affected businesses, he points out that the guidance does not apply to importing or exporting goods between Northern Ireland and Ireland.

Below is the summary of the four key areas, RSM has provided:

Claiming EU VAT refunds

If you have incurred overseas VAT elsewhere in the EU during 2018 then you will, in the event of a no-deal Brexit, no longer be able to submit these claims via the UK portal. HMRC is urging businesses to submit these claims before 29 March 2019, rather than waiting for the normal deadline of 30 September 2019. Refund claims for VAT incurred in 2019, and remaining 2018 VAT not claimed before 29 March 2019, will have to be submitted to the individual countries concerned in the same way as non-EU businesses must, and be subject to any particular rules and conditions applying in that country.

Using the UK’s VAT Mini One-Stop Shop

Businesses supplying digital services to EU private individuals who are registered for UK VAT under the ‘Mini One-Stop Shop’ (MOSS) provisions in the UK will have this registration cancelled from 1 April 2019. Affected businesses will have to re-register for MOSS in an EU member state. This must be done by 10 April 2019.

Digital services threshold

After a no deal Brexit, UK businesses will not be able to take advantage of the £8,818 annual threshold exemption for low-level intra-EU sales of digital services. They will have to charge VAT at the rate where their customer is based and declare those sales to the relevant EU member state. To declare the VAT charge, a UK business can register for VAT in each EU member state where sales are made or register for the VAT MOSS non-Union scheme in an EU member state of its choice.

Checking a VAT number

If a UK business needs to make sure that a customer business is VAT-registered, from 30 March 2019 businesses will be able to check UK-only VAT registration numbers on GOV.UK. From that date, UK businesses can continue to use the EU VAT number validation service to check the validity of EU VAT registration numbers.

Bull concludes: “Small businesses particularly will find all this extra red tape and the associated changes to IT systems most unwelcome.”