Posted by Tax Innovations on 12 Jan 2018
Possible Post-Brexit VAT Issue for Importers
Changes to the way VAT on imports of goods from the EU is paid after Brexit could leave over 130,000 UK businesses out of pocket.
VAT registered businesses importing goods from the EU have to pay UK VAT on those goods. Currently, they account for the UK VAT by adding the VAT payable on the goods to their quarterly VAT return, but can usually reclaim that VAT at the same time, meaning that there is no cash flow issue for most businesses.
After the UK leaves the EU the VAT on imported goods will need to be paid to HMRC upfront (as is currently the case for imports from outside the EU). As the reclaim of the VAT will continue to be made through the VAT return, businesses could be left out of pocket for several months, creating potential cash flow issues.
There are existing systems that could help to mitigate the impact of the change: Businesses with a 3 year, clean VAT record can apply for a deferment agreement, which gives them a month to pay the VAT, reducing the out of pocket period. Monthly VAT reporting could also help reduce the issue (at a cost of increased administration) by accelerating the repayments. However, these options may not be suitable or available for many of the affected businesses.
Nicky Morgan MP, the Chair of the Treasury Select Committee, has written to HMRC to clarify the position regarding VAT on imports from the EU after Brexit and has also called for the Government to provide affected businesses with assistance.
These businesses will already have been hit by the fall in the value of the Pound since the EU Referendum in 2016. Hopefully, the Government will provide a way to mitigate the change to the VAT system and so prevent further hardship for UK businesses importing from the EU.
If you would like any advice regarding the above article or would simply like to discuss other ways in which we could help you or your business, please contact us on 01962 856 990 or email@example.com.
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