Brexit: Buying & Selling Goods to the EU
Theresa May has finally announced her plans for Brexit. The Prime Minister has confirmed that the UK will leave the European Union and subsequently the single market.
At present, we do not know how Brexit will affect businesses from a VAT and duty perspective. However, we do know that a change will occur due to Brexit, and that a customs border of some kind between the UK and EU will be created that may result in VAT and duty being due on imports. The changes that are likely to occur, due to Brexit may be in the form of the following:
- The UK leaves the EU entirely, but agrees specific rules with the EU that apply specifically to the UK. Such agreements may help trade between the UK and EU, but are still likely to result in UK importers paying VAT plus possible duty.
- The UK leaves the EU and has no trade agreement. Therefore, the World Trade Organisation rules would apply so that a customs border is created between the UK and the rest of the world. VAT and duty would be due on all imports of goods into the UK.
Although we do not know which alternative the government will adopt under Brexit, it is possible to plan ahead and develop a strategy for dealing with each of the above alternatives. This will result in your business being a few steps ahead when the new Brexit rules are adopted.
Therefore, in order to develop a strategy to help your business cope with Brexit I recommend the following:
- Create a map identifying all your purchases and sales – This should show where your customers and suppliers belong, the route the goods take to end up at their final destination, who you buy from and who you sell to.
- Plot the different VAT and duty treatments based on the above three Brexit alternatives. This should show where VAT and duty are likely to be due.
- Recognise potential issues, which can be addressed to achieve the best strategy. This should identify the cash-flow impact of paying VAT and duty on goods purchased from the EU, the need to reorganise current EU supply chains, the increased administration in having to file a lot more import declarations, the impact on sales to non-UK customers who will have to pay VAT and duty, and as a non-EU business the way you claim VAT paid in EU countries being changed.
By developing a strategy for each alternative, you will be in a better position to deal with the implementation of the new Brexit rules
Should you wish to discuss how we can help you with your VAT, please contact me on the details below.