UK companies will face huge new VAT burden after Brexit

[Jimgward]

As I indicated some time ago on here, VAT could be the straw to break the camel's back for British firms regarding Brexit. It means companies having to lay out an extra 20% up front.... will also be the situation for EU companies ordering from the UK - which may make us not worth the bother.... Especially if the paperwork means delays to be re-imbursed....

https://www.theguardian.com/politics/20 ... uk-imports

UK companies will face huge new VAT burden after Brexit
Controversial changes in bill would force importers to pay duty upfront on EU goods

Toby Helm and Phillip Inman

Sat 6 Jan ‘18 21.00 GMTLast modified on Sun 7 Jan ‘18 11.49 GMT

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More than 130,000 UK firms will be forced to pay VAT upfront for the first time on all goods imported from the European Union after Brexit, under controversial legislation to be considered by MPs on Monday.

The VAT changes spelled out in the taxation (cross-border trade) bill – one of a string of Brexit laws passing through parliament – are causing uproar among UK business groups, which say that they will create acute cashflow problems and huge additional bureaucracy.

Labour and Tory MPs and peers said that the only way to avoid the VAT Brexit penalty would be to stay in the customs union or negotiate to remain in the EU-VAT area.

The Treasury select committee, chaired by Nicky Morgan, is to urgently investigate the changes to VAT. Photograph: David Levene for the Guardian
On Sunday night the Tory chair of the all-party Treasury select committee, Nicky Morgan, said the committee would launch an urgent investigation. She also said she would be writing to the head of HM Revenue and Customs to see what contingency plans were being made to avoid hitting UK firms.

The bill, which has its second reading in the Commons on Monday, spells out clearly how VAT would have to be paid upfront by companies. The government’s own explanatory notes on the bill say the existing regime will end “so that import VAT is charged on all imports from outside the UK”.

The Labour MP and former minister Chris Leslie said that the VAT hit to firms was “yet another aspect of Brexit that the Leave campaign failed to inform the public about”. He added that he would be tabling urgent amendments to ensure the UK remained in the EU VAT area – a move that would enrage pro-Brexit MPs.

UK companies that import machine parts or goods ready for sale from the EU can currently register with HMRC to bring them into the UK free of VAT. They register the VAT charge and reclaim it later, all as a paper exercise. VAT is added to the price of the product whenever it is sold to the final customer.

Without a VAT deal with Brussels, importers will have to pay the VAT upfront in cash and then recover the money later, creating a huge outflow of funds before they can be recouped.

VAT experts say the imports of services operate separately, with most relying on the exporter to account for VAT. This is expected to remain the situation, although travel companies and financial services firms operate under special arrangements and could face extra costs without a specific agreement covering their industries.

In a briefing sent to MPs, the British Retail Consortium, which represents 70% of the UK retail industry, said: “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 EU-27 for the first time.”

It added: “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. Mitigation measures could include companies instituting a revolving credit facility, or utilising import VAT deferment reliefs.

“Both measures require companies having to take out costly bank or insurance-backed guarantees, so would increase the costs of importing goods from the EU.”

Morgan told the Observer: “One of the things that has not been explored fully is the implications for tax from Brexit. As Brexit comes closer we are beginning to see the reality of how it will bite. The same businesses that are going to be hit by new customs arrangements also face being affected by new VAT rules.”


The Tory peer and former editor of the Sunday Telegraph, Patience Wheatcroft, said it would be “very difficult” to get round the problem of upfront VAT charges for UK companies doing business with remaining EU member states “unless we stay in the customs union”.

The chancellor of the exchequer, Philip Hammond, said: “Britain is a great trading nation, and innovative UK businesses are central to the success of our economy.

“This bill represents the first step in setting up an independent UK customs regime and reaffirms our commitment to deliver a smooth transition for businesses as we leave the EU.”

Treasury sources added that the precise nature of the UK’s future customs relationship with the EU would be the subject of Brexit negotiations with Brussels.

[exodus]

Will EU Companies exporting to the UK have to pay VAT?
Who exports the most in value, the UK>EU or the EU>UK?
Sounds like more Brexit bickering Brits to me!
Amos.

[Dominic]

If you don't like it find an Israeli expat forum to post on.

[memory man]

If you don't like it find an Israeli expat forum to post on.

That's a bit harsh.

[ApusApus]

As I indicated some time ago on here, VAT could be the straw to break the camel's back for British firms regarding Brexit. It means companies having to lay out an extra 20% up front.... will also be the situation for EU companies ordering from the UK - which may make us not worth the bother.... Especially if the paperwork means delays to be re-imbursed....

https://www.theguardian.com/politics/20 ... uk-imports

And how do you know this will be the case, the terms of VAT & most other things for that matter have yet to be negotiated? Maybe you should amend your subject title to "UK companies may or may not face VAT burden after Brexit" it would be far more accurate & less sensational of course!


Shane

[chatsworth]

Am I right in thinking that no one of any standing in any country in the world except those who voted for the UK to leave the E.U. from a knowlege base of virtual zero thinks it's a good idea ?

[Dominic]

If you don't like it find an Israeli expat forum to post on.

That's a bit harsh.

Do you think so? Personally I thought it was in the same vein as "sounds like more Brexit bickering Brits".

[Dominic]

As I indicated some time ago on here, VAT could be the straw to break the camel's back for British firms regarding Brexit. It means companies having to lay out an extra 20% up front.... will also be the situation for EU companies ordering from the UK - which may make us not worth the bother.... Especially if the paperwork means delays to be re-imbursed....

https://www.theguardian.com/politics/20 ... uk-imports

And how do you know this will be the case, the terms of VAT & most other things for that matter have yet to be negotiated? Maybe you should amend your subject title to "UK companies may or may not face VAT burden after Brexit" it would be far more accurate & less sensational of course!


Shane

This is a bill that is passing through the UK parliament, on it's second reading. If there is a hard brexit, there won't be any negotiations with Brussels.

This is the bit I found most puzzling:

On Sunday night the Tory chair of the all-party Treasury select committee, Nicky Morgan, said the committee would launch an urgent investigation. She also said she would be writing to the head of HM Revenue and Customs to see what contingency plans were being made to avoid hitting UK firms.

Surely the head of HMRC will be doing what he's told to do by parliament?

[Dominic]

Am I right in thinking that no one of any standing in any country in the world except those who voted for the UK to leave the E.U. from a knowlege base of virtual zero thinks it's a good idea ?

That depends on your opinion of Trump, I guess.

[chatsworth]

I'll amend it to any sane person of any standing

[Jimgward]

As I indicated some time ago on here, VAT could be the straw to break the camel's back for British firms regarding Brexit. It means companies having to lay out an extra 20% up front.... will also be the situation for EU companies ordering from the UK - which may make us not worth the bother.... Especially if the paperwork means delays to be re-imbursed....

https://www.theguardian.com/politics/20 ... uk-imports

And how do you know this will be the case, the terms of VAT & most other things for that matter have yet to be negotiated? Maybe you should amend your subject title to "UK companies may or may not face VAT burden after Brexit" it would be far more accurate & less sensational of course!

Well. If it was a personal opinion, I could see your point, but its an article from the Guardian, using their headline!

[ApusApus]

Well. If it was a personal opinion, I could see your point, but its an article from the Guardian, using their headline!

But you chose to post this & presumably then you believe it, so I guess it reflects your personal opinion!


Shane

[Jimgward]

Well. If it was a personal opinion, I could see your point, but its an article from the Guardian, using their headline!

But you chose to post this & presumably then you believe it, so I guess it reflects your personal opinion!


Shane

FFS..... you need to chill man.... I get you’re a dyed in the wool brexit supporter, but sometimes some things will come out that are negative re brexit..,... This one is a reputable story, related to a SECOND parliamentary vote! I.e. its all possible - in fact, is more than likely.....

[ApusApus]

Sorry to disappoint Jimgward but I was & still am a remainer ............. however, I respect the decision of the majority! Isn't it called a democracy for a reason?


Shane

[Jimgward]

Sorry to disappoint Jimgward but I was & still am a remainer ............. however, I respect the decision of the majority! Isn't it called a democracy for a reason?


Shane

As is the freedom to protest, lobby and try to change a decision.....

[tonee]

Does anyone actually read the communist come lefty fake news guardian anymore?