On 31 January 2020, the United Kingdom (UK) has left the European Union (EU). A transitional period will apply until 31 December 2020. During this period, nothing will change that is directly relevant for the use of Legalsense at your firm. As of 1 January 2021, a new situation will apply, about which little is known with certainty. The UK and the EU have reached a last-minute agreement at the end of 2020. Although it is not yet entirely clear what the exact consequences will be for doing business with clients or suppliers in the UK, it seems that our assumptions that are discussed below, hold true.
VAT for clients/debtors
Currently, Legalsense expects that from 1 January 2021, UK clients/debtors will no longer be subject to the EU reverse charge rules: services to a client/debtor in the UK will no longer be regarded as an intra-community service (ICP). For your administration in Legalsense (and possibly your accounting software), this means that the 'Applicable VAT' for clients/debtors will have to be adjusted to 'Outside the EU/EEA'.
In the Legalsense release 20.12, it is possible to filter the contact list on the country, applicable VAT, and whether a VAT number is set. This makes it easier to look up British debtors. In this list, you can then select these debtors (one, several, or all) and change the 'Applicable VAT' to 'Outside the EU/EEA'.
VAT on purchase orders
Purchases (services or products) that you make in the UK, for disbursements with a purchase date of 1 January 2021 or later, will have to be booked with VAT "Outside the EU/EEA". How this is handled exactly in your financial administration is often something that is decided by your financial accounting/ERP software works or by your bookkeeper/accountant. When booking disbursements/purchase invoices directly in Legalsense, for UK debtors, you can choose the ‘VAT rate’ ‘Outside of EU/EEA’.
If you have any questions or comments about this, please contact Legalsense support.