First things first
We are no tax advisors! Depending on your country there may be other requirements, but from the general point of view this is what you will have to do for the technical part. We do not guarantee that the information below is valid and correct in any situation, please talk to your tax advisor.
As of the 1st January 2021 the Brexit transition phase ends. From this date on, the UK (England, Scotland, Wales, Northern Ireland) will be fully treated as non-EU member states. That means that you usually do not need to calculate VAT for orders from these countries anymore. In the past you calculated your countries VAT rate for these orders, or the UK VAT rate if you exceeded the delivery threshold.
Right now, about two weeks before this date, there is still no real agreement between the UK and the EU. So for our conclusion you now have the following options:
1) If you sell to consumers within the UK, follow the new UK reglementations
According to the information provided at the UK government website, for our understanding, for "small parcels" below 135 GBP you need to collect 20% VAT and remit the VAT quarterly to the UK. Anything above these 135 GBP will be handled at customs and you do not need to collect the VAT for it. There are also further requirements like registering for VAT at HMRC (Her Majesty’s Revenue and Customs), see details at the UK website.
So when you want to configure this in your Magento 2 shop, you will notice that you can't because there is no such thing like a configurable tax threshold for countries. However from version 1.12.0 of our EU VAT Enhanced extension we support the Brexit (not politically but technically). We already implemented the threshold check for the 135 GBP and the extension can handle whether or not to calculate VAT for the order. Please see the documentation for how to configure it for this purpose.
For Magento 1, the version 1.9.0 of our extension does also support this new UK VAT Threshold. Corresponding configuration advice here.
The extension will not take care of any further actions like customs documents or the bookkeeping part.
2) Implement a minimum order amount for the UK and avoid the need for collecting UK VAT
To avoid the neccessary of collecting and remitting VAT for the UK, you could also implement a minimum order amount for deliveries to the UK. Let us know if you are interested in such an extension. If your primary target group is consumers, you probably do not want this.
3) Just handle the UK as a regular non-EU country
In this case you need to configure the UK as non-EU country, by removing it from the EU country list. The list is configurable for Magento 1 at System -> Configuration -> General and for Magento 2 at Stores -> Configuration -> General.
As soon as you unselect the UK from the EU countries list, our VAT extensions will automatically calclulate zero VAT for the UK. If you still see VAT calculated, change the UK VAT rate(s) to 0% for Magento 1 at Sales -> Tax -> Manage Tax Zones & Rates and for Magento 2 at Stores -> Tax Zones and Rates.
For Magento 2 you can automate the tax rate change with our extension for scheduled tax rate updates.
There is an exception for Northern Ireland. Deliveries to this country are handled like Northern Ireland would be an EU member country. Also the VIES supports validating VAT numbers from Northern Ireland with the new XI country prefix.
As Northern Ireland is part of the UK, Magento does not have an own country select for it. So customers can not select "Northern Ireland" as a country, nor can they choose it as a region for the UK, as those are also not included in a core Magento installation.
We have prepared our extensions and customers will be able to validate XI numbers when GB is selected as a country. Our extensions normally check whether the country prefix of the VAT number is matching the country identifier and disallow orders without VAT for this case.
Configure Northern Ireland
So as far as we know, if Northern Ireland is still handled like an EU member, that means that you need to calculate your countries VAT rate, unless a valid VAT number exists. To do so, create a new tax rate for GB and make the rate dependent on the postcode. Northern Ireland postcodes always start with "BT" so if you type "BT*" in the postcode range field while creating the new tax rate, it will only count for Northern Ireland.
If you think that some of the information is incorrect or if you have further requirements regarding the Brexit, please do not hesitate to contact us. We will find a solution for you!