Post Brexit – Changes to the VAT Return

Background

On 31 December 2020, HMRC updated numerous VAT notices to help businesses prepare for the end of the Transition Period and our departure from the EU Single Market and Customs Union. One of the VAT notices updated by HMRC was 700/12 (How to fill in and submit your VAT Return). The updated guidance is summarised below and will of course also impact the VAT codes you use in accounting platforms such as QuickBooks, Xero or Sage. You can find further guidance on the VAT codes on their respective websites.

Changes to VAT Return

Terminology

The most significant change from 1 January relates to the movement of goods between Great Britain (GB) and the European Union (EU), and the additional issues associated with the treatment of Northern Ireland (NI) as a territory within both the UK and the EU. The table below summarises these changes.

Postponed VAT Accounting and C79

For goods imported into GB and goods imported into NI from outside the EU, there are changes to the way a business can decide to account for and pay import VAT.  You can find further information here. 

VAT return boxes

There have been changes to the box titles on the UK VAT return. Although the VAT return retains its nine boxes, the transactions that are included within these boxes for supplies taking place after 31 December 2020 have changed. The precise nature of the changes also depends on whether the VAT registration includes business operations in NI.  

Box 1 VAT due in the period on sales and other outputs

You should continue to include any VAT due to HMRC in box 1 of the VAT return. If you decide to utilise the cashflow benefit of Postponed VAT Accounting (PVA), the import VAT payable should be declared in box 1. Supplies of services within the reverse charge will continue to be declared in box 1.

Box 2 VAT due in the period on acquisitions of goods made in NI from EU Member States

From 1 January 2021, the only acquisitions you include in box 2 are acquisitions of goods from the EU to NI.

Box 3 total VAT due

This box will continue to be the total of boxes 1 and 2.

Box 4 VAT reclaimed in the period on purchases and other inputs (including acquisitions from the EU)

VAT to be reclaimed as input tax will continue to be entered in box 4. If you are declaring import VAT via PVA, you will also reclaim the import VAT on the same VAT return via box 4, to the extent your business is entitled to recover this VAT. If you are reclaiming import VAT using a C79 (the import VAT certificate issued by HMRC) , you will enter the import VAT amount stated on the C79 once received. Supplies of services within the reverse charge will continue to be reclaimed in box 4, again to the extent your business is entitled to recover this VAT.

Box 5 net VAT to pay to HMRC or reclaim

This box will continue to calculate the difference between boxes 3 and 4 to determine if a payment is due to or repayment is due from HMRC.

Box 6 total value of sales and all other outputs excluding any VAT

The net value of all supplies of goods and services should be included in box 6. This includes supplies of goods and/or services to both business customers and private individuals outside the UK.

Box 7 the total value of purchases and all other inputs excluding any VAT

The net value of all purchases of goods and/or services should be included in box 7. This includes reverse charge transactions.

Box 8 For all supplies of goods and related costs, excluding any VAT, to EU Member States made on or before 31 December 2020

Any supplies of goods up to 31 December 2020 by a UK business will be declared in box 8 and supplies of goods to EU business will be also declared on the EC sales list. Any supplies of goods by a GB business to the EU from 1 January 2021 will no longer be declared within box 8 and there is no longer a requirement to complete an EC sales list.

For supplies of goods and related costs, excluding any VAT, from NI to EU Member States made from 1 January 2021

From 1 January 2021, you will only enter the net amount in box 8 if you are a trading in NI and supply goods to EU Member States. Figures in this box must also be entered in box 6. You will also be required to complete an EC sales list.

Box 9 For acquisitions of goods and related costs, excluding any VAT, from EU Member States made on or before 31 December 2020

This will include the net cost of EU acquisitions (purchases) by a UK business up to 31 December 2020. Purchases of goods from outside GB will no longer be classed as acquisitions  after 31 December 2020 and will not be declared in box 8.

For acquisitions of goods and related costs, excluding any VAT, from EU Member States to NI made from 1st January 2021.

From 1 January 2021, only acquisitions of goods from an EU Member State into NI will be entered in box 9. Figures in this box must also be entered in box 7.

Accounting systems VAT codes One of the most common questions from clients is what VAT code should be used on accounting systems like Xero, Sage and QuickBooks for sales of goods and services into and outside of the UK. Accounting systems have recently released updates detailing what codes should be input into systems for supplies of goods and services on or after 1 January 2021.

If you would like to discuss this further, please get in touch with our indirect tax partner, Jonathan Main on 01772 821 021 or email jonathan.main@mooreandsmalley.co.uk