The UK will not be required to retain VAT after the end of the transition period (on 31 December 2020). However, it is understood that the UK government has no intention to repeal the VAT regime, and that the existing rules will continue in the much the same way. Of course, aside from the question of how the Northern Ireland protocol in the withdrawal agreement will actually be implemented, there will be practical knock-on effects. Key aspects, subject to the UK reaching an agreement to the contrary with the EU, are as follows:
• the VAT rules that will apply to supplies of either goods or services with the EU will be the same as those currently applying to supplies of goods and services with non-EU countries, albeit in Northern Ireland it is intended that EU VAT rules will continue to apply to the supply of goods between Northern Ireland and the EU (as opposed to goods being supplied within Northern Ireland, or between Northern Ireland and the rest of the UK);
• goods entering EU countries from the UK will be treated the same as those arriving into the EU from other non-EU countries, with associated import duties and VAT arising;
• the UK will stop being able to access EU systems, such as the EU mini-one stop shop (‘MOSS’) platform (meaning that businesses may need to consider registering for the portal in another EU member state), and the EU VAT refund system (meaning that VAT refunds will have to be sought using existing procedures for non-EU businesses).
Going forwards, the UK will have greater freedom to change the UK’s VAT regime. Therefore, it is possible that over time the UK’s VAT regime will diverge more and more from the EU regime, particularly with regard to the rates applied to particular goods or services.