Brexit ― overview

Produced by Tolley
Brexit ― overview

The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Brexit ― overview
  • How did Brexit impact UK VAT and customs law?
  • What happened during the implementation period?
  • What is the status of Northern Ireland?
  • What was the significance of reaching a trade agreement with the EU?
  • What areas of VAT are particularly affected by the end of the implementation period?
  • Related reading

This guidance note considers issues that businesses need to consider in connection with Brexit and VAT.

The UK has negotiated a Withdrawal Agreement with the European Union and left on 31 January 2020 subject to a transition / implementation period. The implementation period ended at 11pm (GMT) on 31 December 2020 with a Trade and Cooperation Agreement (running to 2000 pages of text including Annexes and Protocols) having been agreed just days before.

How did Brexit impact UK VAT and customs law?

Prior to the end of the implementation period, a lot of the rules around VAT and customs in the UK were either derived from EU law or were EU laws which had ‘direct effect’ in the UK. The UK was also required to respect case law judgments made by the Court of Justice of the European Union (CJEU).

From 1 January 2021 (ie the end of the implementation period), the legal position has changed significantly and, broadly speaking, EU law which has direct effect ceases to have effect in the UK, and decisions of the CJEU are no longer binding on the UK. UK law which has been derived from EU law (like VATA 1994) continues to apply but can be modified and diverge from the EU position.

Technically, the UK has made provision to copy EU law which has direct effect in the UK into UK law; however, further legislation was also made so that this was broadly not the case for VAT and customs duties legislation.

Despite decisions of the CJEU no longer being binding on the UK, past and present EU case law continues to be relevant in the UK (although its status in UK law depends on whether it was decided before or after the end of the implementation period). See further in De Voil Indirect Tax Service V1.301.

The position is complicated further for Northern Ireland which continues to be subject to some EU law in respect of VAT and

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