The European Parliament has given its blessing to the UK’s Brexit deal. Following this vote, the United Kingdom will no longer be a member of the European Union as of 11:00 pm on the 31st of January 2020.
What will happen after January 31st?
After the United Kingdom leaves the EU on the 31st of January, months of what are expected to be extremely difficult negotiations will follow. Both sides still need to decide what the future for the UK and the EU will look like, this will be worked out in the transition period.
MEPs voted by 621 votes to 49 to pass the withdrawal agreement, which sees Britain leave the EU but remain under most EU rules during a transition until the end of the year. So, the UK will no longer have any voting rights but it will need to follow EU rules. The transition period will begin immediately after the UK leaves the EU and will end on the 31st of December 2020. The transition period can be extended by up to two years, but the length of any extension must be agreed before 1 July 2020.
What needs to be negotiated during the transition period?
Both sides have outlined their aims in a 27-page document known as the political declaration.
Top of the to-do list will be a UK-EU free trade deal. This is important if the UK wants to be able to continue to trade with the EU with no tariffs, quotas or other barriers after the transition.
Apart from trade, many other aspects of the future UK-EU relationship will also need to be discussed. For example:
- VAT procedures
- Access to fishing waters
- Supplies of electricity and gas
- Licensing and regulation of medicines
PM Boris Johnson has stated the transition period will not be extended, but the European Commission has warned that the timetable will be extremely challenging.
VAT and Brexit
The UK government has confirmed it is aiming to keep VAT procedures for goods and services closely aligned to current rules, where possible. If the UK leaves the EU with no agreement, then there will be changes to procedures and current VAT rules that apply to transactions between the UK and EU member states.
Existing VAT rules for the supply of goods and services will remain in place throughout the transitional period. It has been noted on the HMRC website that the electronic EU VAT refund portal will remain open during the transition period. New rules will take effect on 1 January 2021.
A key area for many EU businesses will be the impact of VAT and the potential effects of Brexit. The system of cross-border transactions will be affected following Brexit. The likely VAT effects of Brexit may include:
- Businesses that incur UK VAT will have to file paper-based 13th Directive claims. This can be a slower process and current EVR/8th Directive process will no longer be of relevance.
- UK businesses will continue to be able to claim refunds of VAT from EU member states but they will need to use the existing processes for non-EU businesses.
- Hard copies of original invoices and documentation will need to be sent, but the process does vary across the EU. GTR can assist businesses and make them aware of the processes in the individual countries where they incur costs and wish to claim a refund.
GTR can help you to successfully submit and maximise your VAT refund claims whatever the Brexit outcome.
Read our blog Brexit: What does it mean for your Business and VAT
