Insights

There are potentially some significant new VAT implications for business owners on the horizon as a result of Brexit and the situation is currently under debate. Although in the last Budget, Philip Hammond said he was intending to keep tax laws as close as possible to the current position to avoid any detrimental impact on business owners after the UK leaves the EU, there is an issue with VAT looming ahead.

Unless HMRC acts with interim measures, it could mean cash flow problems for thousands of firms who will be forced to pay VAT upfront in cash on imports when the UK leaves the EU.

It could mean that EC imports would potentially incur VAT as soon as they hit UK shores unless the business owner has a deferment account with HMRC, which would entitle them to defer the charges until the 15th day of the following month.

Currently, MPs are calling for a deal to be brokered between the UK and member states. Nicky Morgan the Treasury committee chair has written to HMRC asking for clarification to try and reassure business owners of their cash flow obligations.

The British Retail Consortium is also concerned about the situation and emphasised the importance for business owners affected to know what their future tax liability will be and whether measures are needed to avoid any negative cash flow implications and also to avoid price increases to consumers. Their chief executive Helen Dickinson, said: "It's ridiculous to assume that it would be easy to bring forward the timings on such significant amounts of cash.” 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."

One UK based furniture retailer, who is importing products from Italy said, “Having to pay the VAT upfront could have a massive effect on our business as it would cause cash flow problems due to the frequency of our collections and having to wait a full quarter before we can reclaim the VAT. It could even put us out of business.”

In our view, HMRC will need to find a temporary solution to this problem to help businesses who import from other member states, to avoid a huge cash flow issue once Brexit is finalised.

For support on all aspects of VAT compliance and planning please contact us at partners@rjp.co.uk