Last Budget before Brexit: Businesses and VAT

Budget Brexit Businesses VAT

The news has been dominated by Brexit over the last couple weeks, mainly speculation as to Theresa May’s final day in office. According to Polly Toynbee of the Guardian, “May’s great escape is as phoney as the loyalty of her Brexit-loving MPs” and the best we can look forward to at the moment is an extension to the transition period

Brexit is now a regular agenda point with clients as we all want to know what’s going to happen, how it will impact on our business’ and how we can plan for it. Unfortunately, we are all still in the dark as to the specific details of any Brexit deal and the worry is that we will only find out at the last minute. One of the big questions is always that of VAT, what changes will be made to the single market and how this will impact on our filing requirements and ability to trade with our current fellow EU partners.

One sector that is going to be affected the most is the travel industry and specifically those that operate under the VAT tour operator margin scheme (TOMS).

Under TOMS, tour operators only register for VAT in the member state where they are based. They are not required to register in every member state where they deliver services however TOMS does not apply to tour operators based outside the EU so, in theory, non-EU operators could be required to register in every member state. Depending on the Brexit deal, UK-based operators could find that they too will be required to register for VAT in each of the member states where they deliver services.

As Martin Pooley, an expert on TOMS, mentioned to me a few weeks ago “The Government’s White Paper of July 2018 envisages trade in goods remaining closely aligned with the EU after Brexit but the position on services is unclear. Unless the UK remains in the EU for VAT purposes, it is possible that even a soft Brexit (for goods) could require UK based operators to register for VAT in other member states”.

Registering in other member states would mean declaring output VAT on sales in other member states (e.g. hotel rooms), less input VAT on costs, and paying the net amount to the authorities in each member state. Sounds like a nightmare? It is and will result in a huge administrative burden plus having to employ the services of EU VAT experts to ensure that EU VAT legislation is adhered too. And what about the language barrier!

Again, in Martin’s words “The UK could continue to require operators to pay TOMS on margins on EU destinations and similarly require inbound operators based in the EU to register for VAT in the UK. We can only hope that common sense prevails and that TOMS will continue without any major changes. After all Mr Hammond wants the money and other member states want the tourists.” Will he reveal anything new in today’s budget?

I recommend that you consider what you would do if you were required to register for VAT in other member states and, if you want to plan for the worst, you could contact accountants in your destination countries and ask about their registration process.

We will of course keep all our clients updated as soon as we know more.

If you require further advice on your VAT status and what implications there are after the budget and Brexit, feel free to contact Andrew Coney at

Sign up to our newsletters to be kept up-to-date with the latest tax news.

Article by Andrew Coney
Partner and Property Sector Expert