Call for VAT traders to get better ‘no-deal’ Brexit guidance

The government must address the concerns of small businesses with the potential for a 'no-deal' Brexit set to clash with the introduction of Making Tax Digital, a tax body warns.

Ministers must also address the prospect that, under no-deal, firms in the EU may no longer be able to obtain VAT refunds from other member states via a single-market mechanism, warned the ACCA.

Such member states would then be classified as ‘third countries,’ indicating that they may keep from refunding VAT to the UK -- as they currently do with US businesses and other third countries.

The ACCA added that a ‘no-deal’ identifying the UK as a third country would require traders’ computer systems to be changed to re-categorise them, “creating additional complexity to [the] VAT system.”

“This further complication to VAT submission would clash dramatically with the government’s new online tax system, due to come into effect just three days later on April 1st,” said Chas Roy-Chowdhury, head of tax at the Association of Chartered Certified Accountants.

He believes that to head off this clash creating disorganisation for small business owners, the government must be “more precise than their current guidance” on the various potential outcomes of a no-deal Brexit on VAT.

In November, the House of Lords Economic Affairs Committee called on the government to delay MTD’s roll out by a year -- a call that was supported by IPSE, and which the ACCA says must now be heeded if detailed guidance on VAT scenarios under no-deal is not issued for traders to follow.

The association's Mr Roy-Chowdhury said: “A scenario whereby just three days prior to that [the start of MTD for VAT purposes], the UK might crash out of the European Union, with all the impacts that could have for those trading with the bloc would present unnecessary challenges for businesses.”


5th February 2019

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