UK retailers will be required to continue collecting and remitting VAT on European cross-border transactions after Brexit. To not do so would be to engage in tax evasion. The planned reforms to the MOSS system achieved by the EU VAT Action campaign, including a low earnings threshold and simplified reporting requirements, are contingent on the UK being a part of the EU. Post-Brexit UK retailers therefore face compliance requirements from a system which they no longer have a say in.
These issues concern the VAT DSM package announced on 1 December 2016.
The VAT issues discussed here are part of the Digital Single Market strategy.
Progress and developments:
In January 2017 the European Scrutiny Committee of the House of Commons reviewed Government progress on implementing the proposed changes, especially where Brexit is concerned.
Their response here is unlike anything else in the full March 2017 scrutiny report.
The Committee notes that “these proposals were foreshadowed in the Commission’s VAT Action Plan “Towards a single EU VAT area—Time to decide”. We recommended that this document should be debated in European Committee B early last year.With a complete disregard for the scrutiny processes of the House the Government has failed to yet schedule this debate on major changes to the VAT system. There will have to be a post Brexit VAT regime in the UK; the extent to which it might match the EU regime remains an important question.
As long ago as April 2016 we recommended that [the proposed reforms] be debated in European Committee B. But disgracefully the Government has yet to schedule this debate.”
These comments are both a testament to the work of the EU VAT Action campaign and a damning indictment of a Government using Brexit as an excuse to ignore ongoing legislative matters which happen to involve the European Union.
The Commitee has requested further clarification from Government on “how much of these proposals would it wish to import into the UK’s post-Brexit VAT regime and about what form of “fiscal frontier” there might be between the EU’s VAT regime and that of the UK.”. They have asked for a response from Government by 9 May.