Navigating the UK EU Import VAT Implications

Introduction

The UK’s departure from the European Union has brought about significant changes to the way businesses handle tax, UK EU Import VAT, and customs procedures across borders. The EU–UK Trade and Cooperation Agreement (TCA) may have avoided tariffs for qualifying goods, but it has not preserved the simplicity and integration of the pre-Brexit VAT and customs environment.

For businesses involved in UK–EU trade, adapting to the new fiscal framework is essential. In this article, we explore the most important changes in tax and UK EU Import VAT policy since Brexit, focusing particularly on the challenges facing EU businesses operating in or trading with the UK.

A New Fiscal Framework Between the UK and EU

Since 1 January 2021, the UK is no longer part of the EU UK EU Import VAT area or customs union. This means all goods crossing the UK–EU border are subject to customs formalities, regardless of value. The removal of frictionless trade has added administrative burdens and costs to cross-border transactions.

Although the TCA allows tariff-free trade for goods that meet origin rules, the agreement does not cover UK EU Import VAT cooperation or simplify indirect tax obligations. UK businesses have lost access to certain EU systems, such as the Mini One Stop Shop (MOSS)  for digital services, and EU businesses must now approach UK VAT compliance from the perspective of a third country.

For example, businesses now need to ensure they are able to handle customs declarations, provide origin documentation, and maintain appropriate invoicing and accounting standards in both jurisdictions. In practice, this has required many to review their supply chains, update ERP systems, and seek local tax expertise on both sides of the Channel.

UK EU Import VAT Refunds in the UK for EU Businesses

One of the most immediate and practical changes EU businesses have faced is the process of recovering UK EU Import VAT incurred in the UK. Prior to Brexit, EU companies could recover UK VAT using the EU’s electronic refund system. This route is no longer available. Instead, EU firms must now rely on the more manual and bureaucratic process outlined under the UK’s 13th VAT Directive procedure.

To submit a claim, the EU business must not be UK EU Import VAT-registered in the UK and must not make any taxable supplies there. Claims can be made for VAT paid on expenses such as accommodation, fuel, conference fees, and certain goods or services purchased during business trips or transactions.

Applications must be submitted by 31 December following the end of the refund year, and must cover a minimum three-month period (or a full calendar year). Businesses are required to submit original invoices, a UK EU Import VAT refund form (VAT65A), a certificate of VAT registration from their home country, and bank details for the refund. It’s important to note that reciprocity applies — the UK only accepts refund claims from countries that offer similar rights to UK businesses.

The process is significantly more complex and time-consuming than before. Refunds can take several months to be processed, and errors or missing documents can lead to rejection. For EU businesses that regularly incur UK UK EU Import VAT, appointing a UK-based tax representative can help avoid administrative pitfalls and ensure proper documentation is submitted.

UK EU Import VAT and Customs Implications

The movement of goods between the EU and UK has been one of the most affected areas post-Brexit. What were once intra-community supplies are now treated as exports from the EU and imports into the UK, with full customs formalities and VAT considerations on both sides.

From the EU side, businesses can generally zero-rate exports to the UK for VAT purposes, provided that the correct evidence of shipment is maintained and that the goods physically leave the EU. However, this process now involves customs declarations, export paperwork, and sometimes longer delivery times.

From the UK’s perspective, all goods arriving from the EU are now imports and subject to import VAT. To help manage cash flow, the UK has introduced Postponed VAT Accounting (PVA), which allows UK VAT-registered businesses to account for import VAT on their VAT return rather than paying it upfront at the border.

For businesses engaged in direct-to-consumer (B2C) sales, the changes are even more pronounced. The previous EU distance selling rules no longer apply. EU retailers shipping goods to UK consumers must now charge UK VAT at the point of sale if the value of the consignment is under £135. This requires UK VAT registration, even if the seller has no physical presence in the UK. See our previous article for further information. 

Above the £135 threshold, UK import VAT is payable by the recipient, and customs clearance will be required. Many EU businesses have found this burdensome and have chosen either to register voluntarily in the UK or to work with local fulfilment partners to simplify logistics and compliance. Please refer to this link if you want to learn more. 

Strategic Considerations for Businesses

In this new environment, businesses must be proactive in reviewing their operations and compliance procedures. For UK businesses trading with the EU, it is crucial to ensure proper customs classifications, maintain origin documentation to benefit from tariff-free trade, and evaluate whether EU VAT registration is required, especially if goods are being held or sold in the EU.

Meanwhile, EU businesses looking to continue trading with the UK must become familiar with UK VAT rules, consider whether local registration is necessary, and prepare for additional paperwork related to customs declarations and VAT refunds.

Accountants and tax advisors have a critical role to play here — not just in ensuring that clients remain compliant, but also in helping them adapt their processes, identify cost-saving opportunities, and reduce risk.

Conclusion

The post-Brexit tax and VAT regime has created a more complex trading environment between the UK and the EU. Businesses on both sides must now navigate new customs rules, adapt to changes in VAT recovery, and adjust their operations to meet the requirements of two separate fiscal systems.

While the transition has been challenging, it also offers an opportunity for businesses to modernise their tax processes, digitise compliance where possible, and establish more robust supply chain strategies.

At WellTax, we work closely with both UK and EU clients to help them remain compliant, efficient, and competitive in this new landscape. Whether you need help with VAT refunds, customs planning, or UK registration, our team is ready to guide you through every step of the post-Brexit fiscal environment. If you want to learn more contact us.