One of the last acts of the EU before Brexit was to make ”quick fixes” to the VAT rules for intra-EU trade. These must be followed by UK businesses. What’s involved?
Simplification
The VAT quick fixes simplify the VAT rules for business-to-business transactions for EU cross-border supplies. For some years businesses importing or exporting between EU countries have sometimes been caught by conflicting VAT rules imposed by their respective tax authorities. The four quick fixes are to prevent such conflicts and became effective from January 2020.
Mandatory VAT number check for zero-rating
When you sell goods to a business in another EU country you must only apply zero-rate VAT if your customer provides you with their EU VAT number. While this has always been recommended practice, until the fix you were only required to have evidence that the customer was in business.
Proof of intra-EU supplies
When you make a supply to a business elsewhere in the EU you must now have at least two documents from sources independent from of customer which show that the goods you’ve sold have been delivered to a place within the EU.
Call off stock
Until now if your business transfers stock from the UK to a location in another EU country before supplying the goods to a customer there have been varying procedures in the different countries to ensure that VAT is accounted for correctly. The quick fix creates a uniform procedure.
Chain transactions
A new rule applies if goods pass through another business before they reach your customer in another EU country, e.g. a UK head office sells to one of its subsidiaries which in turn supplies the customer, but the goods are shipped directly to the customer. Previously there’s been doubt over which business, head office or the subsidiary, is making the supply. The fix requires that one business is identified as the supplier who is responsible for the VAT export procedures rather than them applying at each stage of the chain.
All EU countries must now follow uniform rules when exporting, including obtaining independent evidence that goods have been shipped and an obligation to check that your customer is EU VAT registered.