Brexit – Where are we now
“The United Kingdom will leave the European Union on March 29 2019 and begin to chart a new course in the world”. This was the official statement of the UK government after their meeting in July 2018 in Chequers, where the cabinet agreed upon its strategy for the Brexit negotiations with the EU.
The proposal was to adopt a “common rulebook” with the EU for trading in goods to safeguard friction-less cross border trade. The EU responded by predicting “significant disruption” irrespective of the outcome of the negotiations. There has been agreement reached that in the event of a deal there will be a transitional period until 31 December 2020, giving businesses more time to prepare. However if there will be no deal, the UK will leave the EU on March 29 2019 without any transitional period what so ever.
If the UK leaves the Single Market and Customs Union movement of goods between the EU and the UK would be regarded as the import and export and would be taxed accordingly. So upon import customs duties as well as import VAT will be due.
Not only the movement of goods will be affected, but also the taxation of services provided from and to the UK will alter. UK service providers will not have direct access to EU clients. The Mini One Stop Shopping system (MOSS) which enables UK businesses selling digital services to consumers in the EU to account for VAT due in other member states will no longer apply. Thus UK business would be required to VAT register in all EU member states where it sells its services. Relocating business to the EU would be an option to avoid this.
So what can businesses do now?
For now, assess the parts of your business’ activities which may be impacted and begin to work on contingency planning. Consider taking some or all of the following actions:
- Appointing a steering committee to oversee Brexit developments.
- Identifying the areas of the business that could be impacted by Brexit and the different trading models that may arise.
- Identifying the tax technical concerns that exist.
- Reviewing the no-deal guidance as an indicator of how the VAT system will operate with no-deal, but also this may reflect the position even with a deal (where the UK is outside the VAT and Customs regimes of the EU).
- Starting to model the possible indirect tax changes/costs that could arise.
- Considering practical impact on systems and procedures.
- Continuing to monitor developments.
- Working with trade bodies/industry associations to share concerns and gather information.
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Senior Manager VAT
+31 88 2055000