The transition period for the UK leaving the EU should be 31 December 2020. Once this period is over the UK will be outside the single market and customs union. This could mean that thousands of UK businesses could be disadvantaged by the current VAT system if they wish to keep selling into the EU.
For this reason and others, the Treasury Committee has said it will investigate the “opportunities and challenges” of Brexit for the UK’s VAT regime, as part of the wider enquiry into VAT mentioned in my blog last week.
In January, Chair of the Committee, Nicky Morgan, said that MPs would investigate Brexit proposals in the Taxation (Cross-Border Trade) Bill, which would entail UK retailers and manufacturers having to pay VAT upfront on post-Brexit imports goods from EU member states.
As the Treasury Minister, Mel Stride commented at the second reading of the Bill in the Commons, the Government does not want more than 100,000 businesses to be disadvantaged in cash terms, so the Committee will scrutinise this closely.
The Committee is also asking for views from businesses on the aspects of VAT that cause them the biggest problems and how they might be improved. In addition, it is looking into how VAT-related disagreements between businesses and HM Revenue & Customs (HMRC) can be resolved quickly and fairly.
The enquiry also plans to look at the root cause of the ‘VAT gap’, which is the difference between the amount of VAT that HMRC expects to receive in the UK and the amount of the tax that actually makes it as far as the taxman.
The Committee has asked interested parties to send in written responses to its questions on VAT to reach them by 31 May.
If you have any queries in respect of VAT then please contact Julian Borley on 0117 945 2514.