Recently issued regulations will ensure that in the event of the United Kingdom leaving the EU on 29th March 2019, changes can be made to the relevant legislation which allows UK businesses that make certain specified supplies to non-EU recipients the right to continue recovering input VAT.
The existing legislation lists certain services (the “specified” services) which would be exempt if supplied in the UK or EU and hence there would be no recovery of associated VAT costs. However, when supplied to recipients outside of the EU, a right to VAT recovery is created. Those services primarily include financial ones where:
- They are supplied to persons who belong outside the Member States; or
- Which are directly linked to the export of goods to a place outside Member States; or
- Consist of certain intermediary services.
In the event of the UK leaving the EU this legislation would be amended. The term “Member State” would be amended in each instance and replaced with “the United Kingdom and the Member States”. This will maintain the current VAT treatment applied to these supplies.