19 July 2018

A leading UK business group has highlighted the passage in Parliament of amendments to the Customs Bill which commit the Government to fully separating the UK from the EU’s VAT regime.

“This is the first view businesses have on what the VAT regime could be like after Brexit – and it doesn’t look pretty,” Adam Marshall, Director General of the British Chambers of Commerce (BCC), said.

A separate UK VAT system will, he warned, create significant on-going costs for businesses trading across borders, unless special work-arounds are put in place.

This change will, Dr Marshall continued, pile pressure on HM Revenue and Customs (HMRC) which is already contending with other facets of Brexit, plus the delivery of a new customs system and Making Tax Digital.

At the moment, firms trading with the EU report every quarter on what they have imported and exported, with a VAT bill calculated afterwards.

Without a more generous deferment account scheme or postponed accounting, the BCC suggests, many companies face severe cash flow issues, big new administrative headaches and a serious loss of competitiveness.

“Businesses are hugely frustrated that politics and ideology – rather than real-world economic considerations – seem to be driving every twist and turn in the Brexit saga,” Dr Marshall said. “For businesses, VAT isn’t some obscure technicality. A clear, easy-to-use VAT system is crucial for businesses to trade successfully with partners in Europe – and around the world.”