What happens to VAT if there’s no Brexit deal?
Questions surrounding VAT
Whatever you think of Brexit, there’s no denying that the process is much more complicated than almost anyone expected.
A big part of the problem is that there’s precious little agreement about what Brexit means.
Hard Brexit or soft Brexit? Deal or no deal? World Trade Organisation rules or an arrangement like Norway or Switzerland?
Given there’s precious little agreement at that level, it’s not hard to imagine the UK leaving without a deal because we couldn’t find a widely acceptable way forward.
Even though the government is downplaying the chances of us exiting the UK without a deal, it has now started talking about what businesses need to do if there isn’t one.
Ultimately the government can’t run any risk of embarrassment or being accused of failing to provide the appropriate guidance in good time.
For example, in recent guidance about VAT for businesses, HMRC says:
“It is important that businesses consider how a ‘no deal’ scenario could affect them, and begin to take steps to mitigate against such a risk, however unlikely.”
If you are a business that trades with EU member states, the rest of the document reads like a massive headache.
Topics covered in the context of ‘no deal’ include:
- Accounting for VAT on goods imported into the UK
- VAT on goods sent as parcels by EU businesses
- VAT on imported vehicles
- UK businesses exporting goods to EU businesses
- UK businesses exporting goods to EU consumers
- UK businesses selling their own goods in an EU member state to customers in that country.
Does your head hurt yet? I’m afraid this is only the beginning.
What if you supply services to the EU? What about the EU Tour Operators’ Margin Scheme? What about the UK VAT Mini One Stop Shop (MOSS)? Or Northern Irish businesses trading with the Republic Ireland?
The fact remains that we’ve got until 29 March 2019 – just over six months – to strike, in all its complexity, a deal with the EU.
If we don’t, the VAT landscape is going to change dramatically, as the government’s contingency document shows.
So what does it all mean for your business, right now?
In essence, you’ve got two options.
You can either get prepared for the possibility of a ‘no deal’, or you can trust to luck that the EU/UK VAT arrangements won’t change substantially.
If you do the latter, you run the very real risk of being caught on the hop.
That way, you’ll be as prepared as you can be if no deal is achieved.
Find out more through THP Chartered Accountants
If you have any queries as you get up to speed, do be sure to get in touch with us here at THP Chartered Accountants. We’re putting a great deal of thought into how these potential changes could affect our clients – and we’d be very happy to share our insight with you.
Alternatively, we can also provide you with everyday assistance with bookkeeping and accountancy, auditing and business management or company restructures and acquisitions. We offer everything you need to take your start-up or SME forward.