The end of the Brexit transition period meant that from 1st January 2021 there were changes made to the way VAT is charged between the UK and the EU.

This article is split into two main sections dealing with VAT treatment on or after 1st January 2021, and VAT treatment before 1st January 2021.

Specific changes affecting Great Britain (England, Scotland, Wales) - which excludes Northern Ireland

The arrangements depend on whether your business is registered in Great Britain (England, Scotland, Wales) or in Northern Ireland. Northern Ireland is part of the UK but has slightly different agreements with the EU.

It is therefore important to select the correct country when setting up your business so that Farmplan Business Cloud can apply the right protocols and calculations.

It also makes it easier for you to complete your bookkeeping accurately. Farmplan Business Cloud tailors your settings according to location, so you only need to see options which are relevant to your country’s rules.

When you create your business you will have been asked to select the appropriate country setting. Please note this cannot be changed later.

The choice of country will affect the VAT codes that are available in Farmplan Business Cloud as you will only see those codes relevant to your location.

Transactions between Great Britain (which excludes Northern Ireland) and the EU/ rest of the world will now mostly use either a ‘Z’ tax code for zero rated transactions, or, less commonly, RC tax code where the reverse charge applies*. It is important to select the right one so that your VAT return is accurate! It will not affect the amount of VAT being claimed or to be paid, but it will populate the VAT boxes in accordance with HMRC regulations.

If you are using the Postponed VAT Accounting scheme you will need to account for the Input and Output VAT detailed on your PVA statement. An online statement is available to be downloaded monthly from HMRC which will show the total VAT on Imports for the month just ended.

To do this use the VAT Adjustment option.

You will need to enter 2 Adjustments, both using the same suspense category which will end up with a zero balance.

Enter the date on the statement to ensure that the figures are included in the correct VAT return - i.e. the current one.

PLEASE NOTE that the exact procedures may depend on your type of business (for example goods versus services), the value of the import and the region of the UK that you are in. More details can be found at https://www.gov.uk/guidance/complete-your-vat-return-to-account-for-import-

If you are unsure which tax code to use, please seek help from your accountant.

*Reverse Charge - You’ll only be able to use the reverse charge tax code for designated customers or suppliers. To enable the reverse charge tax code for your relevant non UK customers or suppliers, please tick the 'Reverse Charge?’ box in the Company Settings > Financial Information

Doing this will enable the RC (Reverse Charge) tax code option when you create invoices for that customer or supplier. The VAT will be taken care of for you and will be reported automatically on your VAT return in boxes 1 (VAT due on sales) and 4 (VAT reclaimed on purchases) with the net being shown in box 6, (total value of sales).

Please note, VAT rules can be very complicated so please check with a professional if you are not sure how to treat it.

For HMRC guides to VAT see:

Note

As with the changes to the United Kingdom (Excluding Northern Ireland) a Reverse Charge (RC) tax code has been made available for the relevant transactions with the EU. If you are unsure which tax code to use, please seek help from your accountant.

For the rules on how to report sales of goods from Northern Ireland to the EU see HMRC.

NB this is probably no longer relevant as this date has passed.

If you have a business that offers goods/services outside the UK to Europe then this section of the article will explain how the VAT is treated in Farmplan Business Cloud

​VAT on goods and services to Europe
When selling goods or services from the UK to other EU countries, the VAT treatment can differ depending on your customer.

As a general rule, when selling to non-VAT registered businesses and consumers in other EU countries you should charge them full UK VAT on your sales (using the standard rate 'ST' VAT code in Business Cloud). However, you do need to check each country's 'distance selling threshold' to see whether you need to register there as well (see below).

If you are selling to another EU business that is VAT registered in their country, then you can zero-rate the sale. This means that you charge VAT but at zero percent. To do this you should ask your customer for their VAT registration number and show it on your invoice with a note to say that you are zero-rating the sale.

On your invoices to these customers you should use the following VAT codes in Farmplan Business Cloud:

· ES: Europe Services, if you are selling a service to your European customers.

· EG: Europe Goods, if you are selling goods to your European customers.

You must also complete an EC Sales list which is a quarterly report to HMRC listing the sales to your VAT registered European business customers. If you use the correct VAT codes in Business Cloud then the software will populate your EC Sales list automatically each quarter (always the calendar quarters).

To produce your EC Sales list please go to Reports > EC Sales List

If you purchase an item from a EU country then both input and output is declared at the UK rate on the VAT return. However Farmplan Business Cloud will handle this for you so just enter the net amount on each item but ensure that you use the VAT status of:

· ES: Europe Services, if you are purchasing a service from European customers.

· EG: Europe Goods, if you are purchasing goods from European customers.

The VAT return will show VAT on acquisitions from other EC member states (box 2) and VAT reclaimed on purchases (box 4). The net value will be shown as a purchase (box 7) and value of goods supplied from other EC member states (box 9).