Post-Brexit VAT could be complicated. Accountants are pushing clients to prepare
When the UK leaves the Single Market on 31 December, it will also leave the EU VAT regime. It will no longer be bound to EU principles such as fiscal neutrality, abuse of law or legitimate expectation.
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Some thinktanks see it as an opportunity for the UK to take a more flexible approach, and others are calling for it to be abolished altogether (though given the revenue it brings in, this is unlikely.
Either way, UK businesses selling goods both in the UK and the EU will have to be compliant with local rules.
How much things will change depends on whether the UK gets a trade deal with the EU and what that might entail. Essentially, the UK will become a ‘third country’. Goods crossing international borders will be subject to import VAT. In a no-deal scenario, the government has said it would introduce postponed accounting for import VAT to help businesses ease into the new regime. Other major changes include:
- Many businesses (an estimated 145,000-to-250,000) will have to make import-export declarations for the first time.
- UK businesses might need to engage VAT representatives in different countries in order to comply with VAT obligations across the EU.
- The EU VAT Refund Portal will no longer be accessible for UK businesses, and it will likely take longer for businesses to receive refunds,
- Digital services companies supplying EU non-business consumers using the EU Mini One-Stop Shop (MOSS) scheme will have to switch to the non-Union scheme to account for their sales.
- Non-EU businesses using the UK for their MOSS VAT return will have to move their MOSS identification to an EU member state to continue using the scheme.
Accountants are trying to prepare businesses in the run-up to the end of the transition period. Here’s how they’re advising clients.
Businesses are supported by advisory services and holistic quick-response provision on a national and international level
Steve McCrindle, VAT Partner at Haines Watts
Generally speaking, businesses aren’t ready for VAT changes post-Brexit. It is well publicised that only 24% of UK business are prepared for Brexit.
I have seen a very big influx of enquiries and work from EU-based businesses that have suddenly realised they need a UK VAT registration and assistance with UK Customs matters to enable their goods smoothly enter into the UK.
To help supports clients on a national level, we have identified those businesses to whom Brexit means change and have contacted them directly. This has resulted in working with clients at one end of the scale on simple advisory assignments and at the other end, on cross border restructuring of the supply chain in order to:
- Ensure that clients can provide analogous customer experience post-Brexit to what is on offer pre-Brexit
- Establish a post-Brexit structure that, for example, simplifies goods entering into free circulation within the EU with as little VAT, customs duty and customers declaration/border control ‘red tape’ as possible
- Enable clients to meet their new compliance obligations with as little upheaval – now and going forwards – as possible.
On a global level, we have established multi-disciplinary Quick Response Teams (QRT) with our Geneva Group International (GGI) alliance member colleagues in jurisdictions such as France, Germany, Italy, The Netherlands and the USA (amongst others), covering accounting, company start-up, direct taxes, indirect taxes and legal advisory. The QRT’s allow us to focus appropriate resources on client cross-border advisory needs.
Next steps: Avoiding Brexit’s impact on your business is not an option. We are therefore advising clients that all they really need is the ability to get goods into the UK and/or out into the EU without glitches from 1 January 2021, even if the solution is a temporary one.
We’re then recommending businesses invest in the advice and structuring/planning which will provide a permanent operable solution as soon as possible. And as always, keep things simple.
Verdict: Businesses aren’t prepared for Brexit and VAT so we’re providing business advisory services on a national level and a multi-disciplinary quick response team QRT on a global level.
Businesses are kept up-to-date on a need-to-know basis
Barry Soraff, partner at Raffingers
Generally, those that are more likely to be most affected including importers, exporters and businesses that employ from overseas – are prepared for VAT changes post-Brexit. Those that maybe import/export occasionally for instance probably less so, but they will likely muddle through as they need to.
To help clients prepare, we have reviewed our database carefully to identify any clients we think might be affected and we have sent out a number of newsletters and updates as well as ensuring that we engage with clients directly to make sure they are aware of what they might need to know.
Next steps: We are advising our clients to review their processes and to make sure they are aware of any changes which might affect them as well as making any procedural adjustments which might be necessary.
Verdict: Businesses who deal with the imports and exports of goods on a regular basis are generally well prepared and we’re providing updates to those most likely to be affected.
Mark Rowland is a journalist and former editor of Accounting Technician and 20 magazine.