This weekend saw the British Retail Consortium (BRC ) go on the offensive about additional VAT charges when the UK leaves the EU. They highlight an issue for their 90+ retail members common to every business that buys from the EU.
The BRC fear that in the absence of any announcement about how “import” VAT for goods from the EU will be treated the default position will be they will have to put their hand in their pocket and pay the “import” VAT.
Such transactions today are treated as an acquisition and a paper-work exercise. Post-Brexit they will function in the same way as a true import and require a real-world VAT payment from the recipient to HMRC.
Clearly, no business or trade association is going to advocate having to tie up cash in this way. Hence the BRC are up-and-at-it early in 2018 and have Treasury Select Committee Chair Nicky Morgan on their side. She has written to HMRC to ask them exactly what they plan to do. We have no doubt HMRC are also keen to know from their masters on this matter: The Treasury.
One solution is to introduce self-assessment or postponed accounting for VAT. This concept that has been in the shadows for many years , in fact since it was done away with in the 1970s. In theory this would reduce the need to pay VAT up front on imports but needs The Treasury to take a leap into the dark regarding HM Government cash flows.
We suggest keeping a close watch on both the Treasury Select Committee hearings this year to see what happens.
Without a solution the BRC then their members (and everyone else) will have to pay import VAT on goods arriving from Europe and will have to make cash flow provision accordingly; will this really happen? Will this be the final policy? Will costs be passed to the consumer ? We think not.
Read the weekend press on the topic here:
See our previous news on Customs
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