Companies could face upfront tax following Brexit

Published: 10 January 2018

Companies could face upfront tax following Brexit
The chair of the Treasury select committee recently wrote to HMRC in regards to clarity on proposed new VAT rules and what the rules will mean for firms in the future. Legislation that is expected to alter how imports from countries in the European Union will be treated after Brexit has officially taken place has been drafted.
 
The Customs Bill had a further second reading in Parliament on Monday, this could mean many firms will have to pay VAT upfront in cash to HMRC.
 
Chair of the Treasury committee, Nicky Morgan stated that she would be getting in touch with HMRC in addition to proposing that MPs research the matter further.
 
As Brexit approaches “we are beginning to see the reality of how it will bite”, she told reports. With current regulations, imported goods from the European Union are referred to as “acquisitions” for tax purposes.
 
VAT isn’t paid until items have been sold to the final customer and paid for, but unless Britain stays in the Customs Union, EU goods will be treated like any other import after Brexit which will bring VAT requirements by the 15th day of the following month. The British Retail Consortium expressed concern regarding the government’s lack of methods approaching VAT. 
Their chief executive, Helen Dickinson, stated: "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 went on to say: "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."
In a statement the Treasury noted in the Budget in November that firms benefit from delayed accounting for VAT when goods are imported from the European Union.
 
"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," the Budget statement expressed.
 
According to the statement ministers are also aimed at keeping things “as close as possible to what they are now” once the UK leaves the EU.
 
Considering Britain’s level of trade with the EU on a daily basis this could have serious implications on the haulage industry for firms that trade outside of the UK with the addition of VAT costs to consider.
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