The Chartered Institute of Taxation (CIOT) has given a cautious welcome to a government statement in the Budget small print that could prove welcome relief for importers after Brexit.
Businesses currently benefit from ‘postponed accounting’1 for VAT when importing goods from the EU. This gives them a helpful cash flow advantage. In a statement on page 38 of the Budget Red Book the Government state that they recognise ‘the importance of such arrangements’ and ‘will take this into account when considering potential changes following EU exit’.
The suggestion that HMRC are looking at helping importers with their post Brexit operations is welcomed by the CIOT. However, the Institute cautions business and their advisers that there is no certainty that postponed accounting will be HMRC’s preferred approach when the UK leaves the EU.
Alan McLintock, Chair of CIOT’s Indirect Taxes Sub-committee, said:
“Continuing postponed accounting after Brexit would avoid a huge strain on businesses’ cash flow and ease their respective administration work, especially as it is estimated that around 180,000 business are set to have to deal with customs declarations that have not before, once we leave the EU.2
“Postponed accounting will help cut the cash flow impact on all importers, large and small, where significant amounts of cash will otherwise become tied up due to the delay between the payment of import VAT and the associated later recovery through the importer’s UK VAT return.
“We note that the Government have not promised to implement postponed accounting but only to take postponed accounting ‘into account’ following the EU exit. We look forward to receiving more information on exactly what this means in practice and whether it will be limited to trade with EU countries only or extended to imports from the rest of the world.”
Notes for editors
1. Postponed accounting for import VAT allows businesses to offset import VAT via their quarterly VAT returns for imports from the EU. (NB. Imports from EU are technically called acquisitions while we remain EU members.) For imports from outside the EU a business has to either pay VAT at the point of import or via a deferment account, and then claim it back up to three months later in the VAT return. Such accounting is enabled currently through acquisition VAT for purchases of goods from the EU – which will go after Brexit as we leave the Single Market - and through the reverse charge for services.
2. Introducing customs declarations after Brexit would affect up to 180,000 UK traders and could cost traders over £4 billion a year, according to the IfG analysis paper Implementing Brexit: Customs, see link here.
3. The Chartered Institute of Taxation (CIOT)
The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.
The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries. The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.
The CIOT’s 18,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.
Contact: Hamant Verma, External Relations Officer, 0207 340 2702 HVerma@ciot.org.uk (Out of hours contact: George Crozier, 07740 477 374)More Articles by Chartered Institute of Taxation (CIOT) ...