These are the VAT rules when trading with the UK

When a business in the Netherlands does business with the UK (England, Scotland, Wales, and Northern Ireland), you apply the VAT rules for a country outside the EU. This applies to the purchase and sale of both products and services. There are some exceptions when doing business in Northern Ireland.

Different VAT rules apply to countries outside the EU than if you trade within the EU. Countries outside the EU are called ‘third countries’. Find out how to apply the VAT rules now that the UK, with England as its biggest market, is outside the EU.

Buying products in the UK

When importing products from the UK to the Netherlands, you file an import declaration with customs. You will receive an invoice without VAT from your supplier in the UK. The Dutch Customs charges VAT over the value of the products, including any import duties. If the goods have UK preferential origin, no import duties apply.

Tips

  • If you frequently import goods from non-EU countries, apply for an Article 23 permit from the Dutch Tax Administration. With this permit, you declare the VAT in your VAT return. This saves time, paperwork, and pre-payment.
  • You can store bulk goods in a VAT warehouse (in Dutch). You can then apply the 0% VAT rate under certain conditions.
  • Use Incoterms®. These determine who is responsible for arranging transport and the costs involved. They also helps you arrange who carries the risk for damage to or loss of the goods during transport.

Northern Ireland

After Brexit, Northern Ireland has a separate status within the UK and follows EU VAT rules. If you export products to Northern Ireland from the Netherlands, this remains a so-called intra-community supply for VAT purposes. Your customer in Northern Ireland will calculate their own UK Value Added Tax (VAT).

Shipments from Northern Ireland to the Netherlands are an intra-community acquisition for VAT purposes. The condition is that your Northern Ireland supplier is an entrepreneur. You then include the Dutch VAT on this delivery in your Dutch VAT return.

Selling products to the UK

On the invoice to your UK customer, you charge 0% VAT. This is only allowed if you can prove that the products have left the EU. You prove this with a consignment agreement or export declaration. If in doubt, use this tool provided by the Tax Administration (in Dutch). You do not owe Dutch VAT on exports. However, you must fill in the export turnover on your VAT return. You do so under question ‘3a leveringen naar landen buiten de EU (uitvoer)’ (‘3a, deliveries to countries outside the EU (export)’).

VAT in the UK

The British government levies VAT. Who pays this British VAT depends on your customer and the Incoterm® used. With the Incoterm® Delivered Duty Paid (DDP), for example, you as the seller are responsible for paying UK VAT. You can do so via a UK tax representative, or register yourself in the UK for VAT. You declare VAT to the UK government digitally. For this, you need software.

E-commerce

Online deliveries to private individuals are called e-commerce. E-commerce in the United Kingdom falls under export to a country outside the EU. You apply the 0% VAT rate in the Netherlands. This means you do not owe Dutch VAT. If the value of your shipment exceeds 135 GBP, you are responsible for paying British VAT.

Reverse-charge import VAT

As in the Netherlands, you can also reverse-charge import VAT in the UK. When importing into the UK, you pay UK VAT at customs upon importation. This payment coincides with the import declaration. If you do a lot of business with the UK and are liable for VAT, you may reverse-charge this import VAT on your tax return. You must request permission for this reverse-charge from HM Revenue & Customs (HMRC). This system resembles the reverse-charge mechanism in the Netherlands, often referred to as the ‘Article 23 permit’.

Tips

1. Apply for an EORI number. You need this customs identification number when doing international business.

2. If you make your own import declaration in the UK, or supply directly to UK consumers, apply for a UK VAT number. In addition, you need a UK EORI number for the UK import declaration.

3. Authorised Economic Operator (AEO) status simplifies customs clearance. For example, fewer checks, or priority if your goods do get checked. An AEO permit also shows that you are part of a safe logistics chain. You apply for this authorisation from Dutch Customs.

4. Check the UK Trade Tariff database for the amount of VAT due per product type.

Receiving services from the UK

If you receive a service from the UK, you report the VAT in your periodic VAT return. The service provider in the UK passes the VAT requirement to you. You receive an invoice without a VAT amount. This states that the VAT passed on is reverse-charged. If the service provider is not allowed to reverse-charge the VAT, you pay UK VAT. You may be able to reclaim it in the UK. The Tax Administration’s tool (in Dutch) shows who should pay the VAT and where. This tool takes into account any exceptions.

Providing services to the UK

The standard rule for providing services to UK businesses (B2B) is that VAT is paid in the country where your client is based. The UK is the ‘place of supply of services’. In this case, UK VAT rules apply. When you provide services to private individuals (B2C) residing in the UK, you charge Dutch VAT as standard.

Exceptions sometimes apply to services to both B2B and B2C customers. This depends on the type of service you provide. Use the Tax Administration’s tool (in Dutch) to find out what you have to do with VAT.

If you provide B2B services in the UK, you can sometimes pass the UK VAT to your UK customer. On your invoice, you then state your customer’s UK VAT number and include the text ‘reverse-charge mechanism’. Under this local reverse-charge mechanism, your customer will pay the UK VAT in the UK. There are special rules for situations when you cannot reverse-charge VAT, such as construction work on property, or selling tickets for events in the UK. You are then responsible for calculating and paying UK VAT. You must apply for a VAT number from the UK government and file a declaration in the UK. The UK government explains how this works.

Alternatively, you can use a UK agent. This fiscal representative pays UK VAT on your behalf. Then you do not have to register your business in the UK. Talk to your accountant or bookkeeper to discuss if this is wise and how to do it.

Northern Ireland and services

Unlike the separate status for goods, this status does not apply to services (in Dutch). Northern Ireland is no longer an EU member state for services. You then treat VAT as stated in the paragraph above.

Reclaiming VAT paid

You can reclaim the VAT you pay on goods and services you buy or use to do business in the UK. For example, business expenses for accommodation, meals, conferences, and travel expenses. You can also reclaim 50% of the VAT you pay for renting or leasing a car.

You reclaim VAT if your business is registered outside the UK, you do not live there, and you are not required to register for UK VAT. You do not reclaim VAT on the purchase of a car, or for goods and services bought for resale, used for business entertainment, or used for non-business activities.

You reclaim VAT paid in the UK from HMRC using form VAT65A. The UK government provides more information on VAT refunds.

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