Last reviewed 20 December 2018
ACCA, the global professional accounting membership body offering the Chartered Certified Accountant qualification is warning of future risks to small and medium-sized enterprises (SMEs) due to the potential for a no-deal Brexit clashing with the introduction of HMRC’s new Making Tax Digital (MTD) scheme.
The current system whereby companies in the EU are able to obtain VAT refunds from other Member States through a single-market mechanism could cease if there is no deal on Brexit when the UK leaves the EU on 29 March 2019.
ACCA points out some Member States, who would then be classified as third countries, may keep from refunding VAT to the UK as they currently do with US businesses and other third countries. In addition, a no-deal Brexit where the UK is identified as a third country to the EU, would require UK businesses’ IT systems to be changed in order to recategorise them, creating additional complexity to the VAT system.
The association says this further complication to VAT submission would clash with the Government’s new MTD online tax system, due to come into effect just three days later on 1 April, creating new rules and classifications to be adhered to within just 72 hours.
To prevent this clash in creating disorganisation for small business owners, ACCA is calling for the Government to be more precise than its current guidance released back in August and produce specific scenario plans for the various potential outcomes of a no-deal Brexit on VAT.
Chas Roy-Chowdhury, Head of Taxation, ACCA, said: “This issue is of considerable concern for SMEs with many businesses reviewing how they will adhere to a new digital system MTD in April.
“A scenario whereby just three days prior to that, the UK might crash out of the EU, with all the impacts that could have for those trading with the bloc, would present unnecessary challenges for businesses.
“We are stating that the Government must be specific with the various outcomes of a no deal and provide detailed scenario planning guidelines for businesses to follow.”
The House of Lords Economic Committee has already suggested the Government delay the rollout of MTD by a year in order to avoid adding to the complexity many businesses may face post-Brexit.
This article first appeared on www.accountancydaily.co.