VAT: cross-border supplies post-Brexit

Post-Brexit position
Example
Takeaways for suppliers

It is often easy to assume that only parties which live in the United Kingdom are required to pay UK value added tax (VAT). However, UK VAT is often paid by individuals, trustees and companies which are resident outside the United Kingdom but use the services of professionals which are based in the United Kingdom. The extent to which VAT is or is not chargeable has changed as a result of Brexit and the end of the transition period on 31 December 2020. This article considers the new post-Brexit VAT position.

Post-Brexit position

From a UK supplier's perspective, an EU customer is now treated in much the same way as a customer in the United States or another non-EU country. In summary, this means that supplies to business customers, subject to various exceptions, continue not to attract VAT. There is even better news for EU non-business customers in that services from UK professionals will no longer attract VAT (subject to various exceptions – most noticeably, UK land-related services).

Example

By way of an example, Mrs Jones is a senior banking executive who has been living in Frankfurt since June 2016 and owns the following UK assets:

• cash in a UK bank account that may be used to buy a development site in England in the name of either Jones Ltd (a company incorporated, centrally managed and controlled and therefore tax resident in Jersey) or Immobilen GmbH (which is tax resident in Germany);
• a holiday home in the Lake District (entirely used by Mrs Jones and her family); and
• a portfolio of shares in UK limited property investment companies.

Mrs Jones is tired of subsidising her son and wants to see him married off.

She incurs a number of professional fees in relation to the above and is pleasantly surprised that one of the invoices from her UK tax adviser for submission of her January tax return is not subject to VAT.

A summary of the possible VAT invoices issued on or before 31 December 2020 and on or after 1 January 2021, in respect of the professional services which Mrs Jones has used, is shown below.

Takeaways for suppliers

Individuals living in the European Union may be more likely to query their UK VAT invoices, so suppliers must think carefully and ask themselves certain key questions:

• Where do their customers belong? Do they have evidence of this?
• Who are they supplying – a private individual or someone in business?
• What are they supplying – in light of Gray & Farrer, does it have intellectual gravitas?

For further information on this topic please contact Elizabeth Small at Forsters LLP by telephone (+44 20 7863 833) or email (elizabeth.small@forsters.co.uk). The Forsters LLP website can be accessed at www.forsters.co.uk.