Brexit and VAT starting from 01.01.2021

On 1st of January 2021 the transition period ended and the United Kingdom officially left the European Union. This brings several changes to calculating and declaring VAT on transactions with the UK.

The following table summarizes the changes:

GB – United Kingdom (excluding Northern Ireland)
NI – Northern Ireland

Transaction	Area	Type	VAT before Brexit	VAT after Brexit	Declaring before Brexit	Declaring after Brexit
Sale	GB	services	0%	0%	KMD 3, 3.1 VD	KMD 3
Sale	GB	goods	0%	0%	KMD 3, 3.1, 3.1.1 VD	KMD 3, 3.2
Purchase	GB	services	20%(reverse charge)	20%(reverse charge)	KMD 1,4,5,6	KMD 1, 4, 5, 7
Purchase	GB	goods	20%(reverse charge)	Tax-free or Not on VAT declaration	KMD 1,4,5,6,6.1	Not declared, import VAT is declared
Sale	NI	services	0%	0%	KMD 3, 3.1. VD	KMD 3
Sale	NI	goods	0%	0%	KMD 3, 3.1, 3.1.1 VD	KMD 3. 3.1, 3.1.1 VD
Purchase	NI	services	20%(reverse charge)	20%(reverse charge)	KMD 1, 4, 5, 6	KMD 1, 4, 5, 7
Purchase	NI	goods	20%(reverse charge)	20%(reverse charge)	KMD 1, 4, 5, 6, 6.1	KMD 1, 4, 5, 6, 6.1

Brexit related changes and updates in SmartAccounts

Concerning Brexit, we have made the following changes in SmartAccounts:

Countries now have European Union membership start and end dates.
You are notified if the VAT declaration period has sales or purchase invoices to the UK and the country’s EU membership end date has not been set.
The VD declaration has changes related to Northern Ireland.

European Union membership end date

Countries in SmartAccounts can now have start and end dates for EU membership. You can check the status of any country by selecting ‘Settings’ – ‘Countries’ in the menu.

If the country of United Kingdom has been manually added to SmartAccounts, it’s EU membership end date must be set to 31.12.2020 manually.

The systemic United Kingdom country’s EU membership end date has been changed automatically.

NB! The EU membership start date is required but an exact date is not necessary unless it’s a new EU member. So 01.01.2000 is fine as the start date for the United Kingdom.

Brexit related notifications on VAT declaration

A VAT declaration that is calculated for a period starting from the beginning of 2021 checks all of the period’s sales and purchase invoices to the United Kingdom.
If the country should also then lack an end date for EU membership, a notification is displayed.

What should I do if a VAT declaration has been created and I get notified to check the settings of the UK?

Please open ‘Settings’ – ‘Countries’.
Open the United Kingdom and set it’s EU membership end date to 31.12.2020.
Save the changes

Sales invoices

If there are sales invoices to the UK without an EU membership end date in a period, all you have to do is correct the country settings and refresh the VAT declaration.

The sales invoices are then automatically declared on the right rows.

Purchase invoices

If there are purchase invoices from the UK without an EU membership end date in a period, you first have to correct the country settings and then also update all of the purchase invoices:

Open the purchase invoice and activate ‘Change’ mode (if necessary);
Open the invoice vendor by clicking on it’s name.
Choose The United Kingdom (code GB) again as it’s country.
Check if all the VAT rates of the invoice rows are correct (with the help of the above table).
Save the invoice.
Once all the purchase invoices have been dealt with, refresh the VAT declaration.

VD declaration changes related to Northern Ireland

It’s important to note that as of the 1st of January 2021, United Kingdom sales are no longer declared on the VD declaration. The only exception is the sale of goods to Northern Ireland.

In that case the VAT registration number prefix “XI” is changed to “GB” on the VD declaration automatically.

Get more info from the Tax And Customs Board