From the date of the actual exit, EU law will cease to apply. The issue that arises is how VAT will be charged on trade with the remaining EU Member States. Currently, VAT is generally not charged on the supply of goods, and certain services from other EU Member States (with some exceptions). However, when the UK leaves the EU VAT Area, supplies which would previously have been intra-community supplies of goods and services are likely to be treated as imports and exports between the UK and other EU Member States. As a result, a UK importer may have to pay import VAT at the point of importation of goods from the EU, and may also have to make Customs declarations as well. Moreover, should the place of supply rules implemented by the UK conflict with the place of supply rules of the EU law this may lead to potential double taxation issues and obligations for EU businesses to register for VAT in the UK, especially if the reverse-charge rules may no longer apply or apply differently. Additionally, if the definitions of “place of business” and “fixed establishment” for VAT purposes changes in the UK, this could also lead to potential double taxation issues.

Customs and trade implications

Customs duties are currently governed by EU not UK law. Following Brexit the UK will be in a position to introduce its own legislation which may vary from the existing provisions. The impact of the possible changes in customs duties is likely to be felt across the supply chain for goods, since post Brexit the UK may be outside the customs union of the EU. Such changes may not only affect the duty rates, but also the conditions for operating duty reliefs and general customs procedures. The introduction of other customs controls may have both a time and cost implication for EU businesses trading with the UK. In relation to non-tariff barriers, at present the UK and EU standards are aligned, meaning that it is impossible for countries within the EU to raise non-tariff barriers between them. However, in case the UK chooses to introduce different standards, this could lead to greater complexities for businesses trading with the UK.