Despite Parliament voting against leaving the EU with no deal, this does not mean the risk of a no deal has entirely disappeared. Forward planning in these circumstances is both difficult and confusing for businesses attempting to keep on track.
One of the key issues, for example, is around import VAT and tariffs. There has been contingency planning and, should there still be no deal, a postponed VAT accounting system will be introduced and a temporary 0% tariff regime will apply to the majority of imports.
Postponed VAT accounting
Without a deal, goods brought into the UK will be treated the same as imports from outside the EU. Currently, this would mean businesses having to pay UK VAT at the time of importation. However, a system of postponed accounting for import VAT will be introduced, with HMRC recently publishing guidance on how this will work.
Businesses will be able to account for import VAT on their VAT return, rather than paying import VAT on or soon after the time that the goods arrive at the UK border. This will reduce any cash flow impacts after the UK leaves the EU.
To ensure parity of treatment, the system will also apply to non-EU imports.
Non-VAT registered businesses and individuals will still have to pay import VAT at the time of importation.
Tariff regime
A temporary tariff regime will remove customs duties on the majority of imported goods for a period of up to 12 months. Under the regime, 87% of total imports to the UK by value will be eligible for tariff-free access. This will prevent potential price spikes.
The 13% of remaining tariffs will apply for a variety of reasons. High EU tariffs have traditionally supported farmers, and there are a number of sectors where tariffs will help provide support against unfair global trading practices. Tariffs will also be retained on a set of goods to meet the UK’s commitment to supporting developing countries.
If a deal is reached, the UK will effectively remain within the EU Customs Union until 31 December 2020. There will then be no immediate impact on trade and the measures outlined above will not need to be implemented.
With the immediate focus on Making Tax Digital for VAT coming in from April, it’s worth keeping abreast of the measures that may affect your VAT position long term in these uncertain times.
Drop us a line to 0114 266 4432 or info@smhca.co.uk if you have any queries.
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