According to a recent article the Government has published the first document outlining Britain’s customs arrangements on leaving the EU. With the almost inevitable increased bureaucracy, many businesses could find themselves tied up with more paperwork in a new system that could send the UK back to its pre-single market state.
This document, the Future Customs Arrangements: A Future Partnership Paper, outlines two approaches to Britain’s trade policy post-Brexit. The Government has already stated intentions to maintain a partnership with the EU, whilst also forging new trading relationships across the globe, with the aim of ensuring “frictionless trade” between the UK and the EU after the UK’s official departure.
However, this could be easier said than done, especially from a VAT perspective. At the moment, the UK operates as part of the EU Customs Union, which makes it much easier import and export goods around countries that are EU members. Countries in the EU Customs Union don’t impose taxes in the form of duty on imports of each other’s goods – but Britain has said it will leave the EU Customs Union upon Brexit.
The partnership arrangement would remove the need for any customs checks between the UK and the EU, but this has been untested, so outcomes are uncertain. There could be a huge amount of administration involved.
If Britain comes out of the EU Customs Union and Single Market, dispatches on VAT returns will no longer apply. Instead there will be import VAT for the customer to pay on any exported goods, instead of acquisition VAT. This will be a big step backwards, as we will end up with a system that was pre-single market, so we will have gone full circle.
The UK is a big market for the EU, but a free and frictionless border could be a way off. Nicola Sturgeon has called it a “daft, have cake and eat it approach”, and it leaves one thinking how Britain can really secure this ‘best of both worlds’. If we do maintain a temporary EU Customs Union for an interim period, then much more clarity is required, particularly for businesses looking to make long-term investments.
If you have any concerns surrounding how Brexit might affect your business, whether it is VAT, moving premises overseas or any other tax planning advice, Wilkins Kennedy can help. Contact us today to find out more information.