If you haven’t heard about the Taxation (Cross-border Trade) Bill, then you will become more aware of it this week. It’s one of numerous Brexit bills going through parliament at the moment and it specifically regards import VAT.
As it stands at the moment, companies can apply to defer paying import VAT on some goods from the EU, and only pay once the goods have been sold. under the terms of the bill the government proposes that “import VAT is charged on all imports from outside the UK”. The could have serious implications for businesses in terms of cashflow and expense because the VAT would need to be paid upfront and subsequently claimed back.
In a briefing memo for MPs, the British Retail Consortium (BRC) said: “If the bill becomes law without any commitment to inclusion within the EU VAT area, UK businesses will become liable to pay upfront import VAT on goods being imported from the EU-27 for the first time.”
“Liability for upfront import VAT will create additional cashflow burdens for companies, as well as additional processing time at ports and border entry points attached to the customs process. Mitigation measures could include companies instituting a revolving credit facility, or utilising import VAT deferment reliefs.
“Both measures require companies having to take out costly bank or insurance-backed guarantees, so would increase the costs of importing goods from the EU.”