What are the implications of VAT
for businesses if there’s no Brexit deal? That’s precisely what the recent guidance published by the government sets out to explain.
A situation where the UK leaves
the European Union in a no-deal scenario is thought to be unlikely, given the
mutual commitments of the UK and the EU in reaching a negotiated outcome. The
government believes that negotiations are going well and that a positive deal
should be on the cards. However, they do say that they have a duty, as a
responsible government, to ‘prepare for all eventualities’, and that includes a
no-deal scenario.
The government has been putting a
programme of work in place over the past two years to make sure that the UK is
primed and ready in all scenarios. So, as March 2019 approaches, it has found
itself in a situation where preparations need to be accelerated. They have,
therefore, put together a series of technical notices, with a view to helping
individuals and businesses understand what would happen in a no-deal scenario,
so that informed preparations can be made.
You will probably have received a
notice from HMRC recently. This notice carried the aim of informing UK
businesses of the implications for VAT rules for goods and services traded
between the UK and EU member states should the situation arise that the UK
exits the EU with no agreement.
The government is confident that
a good deal will be reached that works for both sides, but as we said, all
scenarios are being prepared for. In other words, it is contingency planning.
The government is keen for businesses to be fully aware of how a no-deal
scenario would affect them, and wants them to start taking steps to mitigate
any risk, even if it is unlikely. They have issued a technical notice including
early planning support on VAT to help businesses understand the potential
impacts. They say that further details, including specific actions that
businesses should take, will be provided in due course.
The government says that for most
UK businesses, there will be no change to VAT rules. But for those that are
affected, there are numerous technical notices designed to help, such as the Trading with the EU if there’s no Brexit deal notice, covering customs, excise
and import processes at the border.
The UK will continue to have a
VAT system after it exits the EU. The revenue that comes from VAT is crucial
for funding public services. The VAT rules around UK domestic transactions will
continue to apply to businesses in the same way as they do now.
If the UK exits the EU on 29
March 2019 without a deal, the government will aim to maintain VAT procedures
as close as possible to how they currently run for continuity purposes.
However, if there is no deal, then changes will be made to the VAT rules and
procedures relating to transactions between the UK and EU member states. The
government has taken decisions and actions where necessary in order to mitigate
the impacts of these changes for businesses. The main changes that will take
place are summarised here.
No changes will be made before March
2019; however it is important for businesses that are importing goods from the
EU, exporting goods to the EU, supplying services to the EU and interacting
with EU VAT IT systems such as the VAT Mini One Stop Shop (MOSS) to start to
prepare now.
If you are uncertain as to where
to look for advice, talk to your local bookkeepers in the first instance. They
will point you in the right direction. Don’t delay in starting to prepare,
because March 2019 is not far away.
