Government outlines VAT proposals for post-Brexit Britain

Businesses groups have voiced concerns over government proposals to amend the way in which EU imports will be treated following the UK’s withdrawal from the EU in 2019.

Plans to change the VAT rules are included in the Taxation (Cross-Border Trade) Bill 2017-19, which is currently making its way through Parliament. The proposals could see UK businesses being required to pay VAT upfront in cash to HMRC.

Currently, goods imported from the EU are treated as ‘acquisitions’ for tax purposes, meaning that VAT is not paid until the products have been sold to the end consumer. However, if the UK exits the Customs Union, goods from the EU will be treated in a similar way to other imports.

The British Retail Consortium (BRC) has warned that the proposed changes could create ‘additional burdens’ for UK businesses. Commenting on the Bill, the BRC stated: ‘If the Bill becomes law without any commitment to inclusion within the EU VAT area, UK businesses will become liable to pay upfront import VAT on goods being imported from the EU27 for the first time.

‘Liability for upfront import VAT will create additional cashflow burdens for companies, as well as additional processing time at ports and border entry points attached to the customs process.’

Meanwhile, the Chair of the Treasury Select Committee, Nicky Morgan, has written to the head of HMRC, Jon Thompson, urging him to address the BRC’s concerns.

Ms Morgan stated: ‘I have written to HMRC to seek clarification on the costs to businesses and consumers arising from this legislation, the options being considered to mitigate these costs and the likelihood of the UK participating in the EU VAT area as part of its end-state relationship with the EU.’

As your accountants, we can help you with your VAT obligations. Please contact us for advice and assistance.

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