Will companies face upfront VAT charges in the post-Brexit business landscape?
Under existing rules, goods imported from the European Union are referred to as ‘Acquisitions’ for the purposes of tax and because of this, no VAT is paid until the goods have been sold to the end purchaser or customer. Once the UK leaves the EU and the Customs Union, goods imported from the EU will be treated like any other imports and will, therefore, attract VAT by the 15th day of the following month. This could have a huge potential impact because it could force thousands of businesses to pay VAT upfront to HMRC before they have sold items they’re bringing into stock.
A lack of clarity
Nicky Morgan MP, chair of the Treasury Committee has said she will be writing to HMRC for clarity on the matter and indeed in the November Budget there was a statement from The Treasury acknowledging the business benefit obtained from postponed VAT accounting when importing goods from the EU:
“The government recognises the importance of such arrangements to business, due to the cash-flow advantage they provide.”
“The government will take this into account when considering potential changes following EU exit and will look at options to mitigate any cash-flow impacts for businesses,”
Helen Dickinson, chief executive of The British Retail Consortium said: “It’s ridiculous to assume that it would be easy to bring forward the timings on such significant amounts of cash.”
“To plan ahead, retailers need to know what their liability on tax will be, and what measures are going to be taken to avoid this hit to cash flow with new costs on importing goods from Europe and higher potential pressure on prices for ordinary shoppers.”
She added: “Resolving this uncertainty can be achieved by securing a deal between the UK and EU on VAT and through policy measures adopted by HMRC like self-assessment.”
We hope to bring you more positive news in the coming weeks regarding clarification for UK businesses from The Treasury and HMRC.