VAT and Brexit
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Warning Brexit has changed how EU member states interact with the UK. Please consult with your tax adviser on how Brexit has impacted your tax situation. |
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Note Avalara AvaTax is a tax compliance solution that automates the complexities of calculating sales tax, VAT, and GST. Please ask your Customer Account Manager about Avalara AvaTax and how it can help with your VAT calculations. |
The UK left the European Union on 31 January 2020. As part of the Brexit Withdrawal Agreement, the UK remained inside the EU VAT regime until 31 December 2020. See Avalara’s free Brexit e-commerce guide for details on the VAT and customs issues related to Brexit. Details of the UK-EU Brexit trade deal can be found in this Avalara VATLive article.
With the UK exiting the European Union, Northern Ireland enters into a special VAT and customs relationship with the EU. Whilst Northern Ireland will remain within the UK VAT area, it will track EU VAT regulations for goods. Isle of Man is also going to be in a similar situation. Avalara already supports the Isle of Man as a country entity using the ISO code “IM”.
VAT between Northern Ireland and UK
The UK, as a whole, will leave the EU customs union and Northern Ireland will remain unequivocally part of the UK’s customs territory. This will lead to some changes for goods movements into Northern Ireland from Great Britain, as well as how VAT is levied on goods and services in these two regions. Northern Ireland will be assigned a special ISO code of “XI”. Post-Brexit, when doing business with Northern Ireland please use the country code "XI" to ensure proper calculation and VAT processing.
As ERP, Marketplace, and Commerce platforms partners, it will be necessary that country lists are updated to include the new Northern Ireland ISO code: "XI".
The following VAT logic will be applied after Brexit for inter UK and Northern Ireland trade:
- VAT on goods sold between Great Britain and Northern Ireland: VAT will continue to be handled the same as it was pre-Brexit for goods sold between Great Britain and Northern Ireland. There are certain exceptions to this.
- Businesses moving their goods from Great Britain to Northern Ireland: When a VAT registered business moves goods from Great Britain into Northern Ireland, VAT will be due and should be included as output VAT on the VAT return.
- Businesses moving their goods from Northern Ireland to Great Britain: A business is not required to account for VAT when moving goods from Northern Ireland to Great Britain. This is not applicable when the goods have been subject to a sale or supply to a customer.
- Sales of goods from Great Britain to Northern Ireland: UK VAT groups will continue to operate largely as they do now. VAT groups will continue to be able to include members that are established in Northern Ireland as well as members that are established in Great Britain.
- Intra-EU simplifications: Intra-EU rules and simplifications, such as triangulation, are not available for goods moving through Great Britain.
More information on the impact of Brexit on VAT
- Avalara VATLive Blog: UK-EU Brexit trade deal
- Avalara VATLive Blog: EU-UK Brexit Trade and Cooperation Agreement - VAT fraud & mutual assistance
- Avalara VATLive Blog: Clarification of Northern Ireland ‘XI’ VAT number
- See the Avalara Brexit Hub for up-to-date and ongoing information updates
- Read Avalara’s free Brexit e-commerce guide
- UK Government: Accounting for VAT on goods moving between Great Britain and Northern Ireland from 1 January 2021
- UK Government: Moving goods under the Northern Ireland protocol from 1 January 2021