Post-Brexit VAT – What Are the Implications For My Business?
With Brexit negotiations ongoing, there are still uncertainties about the wider impact of the UK leaving the European Union. One big looming question is – how will Brexit impact VAT? And what will be the knock-on effects for UK businesses?
With trade changes about to occur, it’s important you keep up-to-date with latest news, so you can prepare for any alterations to your finances. Keep reading to find out the most recent revelations and what to expect after Brexit…
When should businesses expect changes?
Whether you agree with the Brexit deal or not, it’s important that you know how it will affect your business in the coming months and years.
The UK isn’t scheduled to leave the EU until March 2019. But, with little under a year left, there’s still no new trading agreement in place. A potential 21-month extension looks likely, in which new legislation will be created and UK-based business will have more time to adjust to changes.
The transition period…
The EU have offered the UK a transitional period of 21-months. During this time, it is expected that the UK will formally break with directives and laws, under the current 5-year budget cycle for the EU.
However, the challenge of creating a UK-EU trade agreement has caused new tensions for government officials, with people on both sides of the debate criticising how the Conservative government plans to negotiate updated terms
Concerns over cashflow issues and extra processing times at border entry points is a particular worry for the customs process in trading. But, what costs should businesses expect under new regimes?
What does Brexit mean for VAT?
At present, leaving the EU means that the UK is likely to be outside the single market and customs union. This will understandably have an impact on thousands of UK and EU companies.
Under current rules, UK businesses don’t have to pay VAT upfront on goods imported from the EU. Instead, these purchases are treated as “acquisitions” by HMRC, meaning VAT is only paid once the products have been sold (by the UK business to their customer) and paid for.
An end to this arrangement would see EU imports treated like imports from any other non-EU country. The result? UK businesses will have to pay VAT on their purchases by the 15th day of the next month.
Traders and retailers are also advised to prepare for an administrative impact, with over 130,000 businesses will be required to pay VAT upfront. In a recent survey by Avalara, it’s estimated that over 27,000 UK small companies trading within the EU could come up against annual compliance costs of nearly £770 million after Brexit.
Uncertainty for new VAT regime
Moving forward, businesses are questioning what exactly the new VAT regime will look like. Brexit will have a big impact on the day to day goings on in business, particularly those who import and export from and to the EU. If you still sell to EU countries, for example, be prepared to register for VAT immediately in that specific country.
More broadly, these new financial uncertainties show just how much work is needed from officials to negotiate the best deal for UK businesses.
Stay on top of your business VAT
With changes ahead, it’s important to stay on top of your business’s tax affairs. That’s where UWM Accountants come in, we’re a team of expert accountants in Leeds, with over 30 years’ experience. Our VAT services cover everything from registration, to liability and compliance. Get in touch today to discuss how we can make your VAT management quick and effortless, while keeping your business up-to-date with any changes.