Could Brexit create unforeseen additional cash flow issues?
Brexit might create unforeseen additional cash flow issues if buying goods from the European Union and there will be further changes in 2019. However, with advance planning, cross border businesses can mitigate the impacts.
The precise impact of Brexit on goods bought from EU countries may not be clear for some time. Currently, VAT on B2B arrivals of EU goods is declared on the buyer's VAT return, usually as a nil net tax adjustment.
However, with a customs border in place, importers are likely to face import VAT bills (20% for most goods) at the time the shipment enters the UK. This would not be recoverable until the importer's next VAT return - a cash flow cost.
In the last Budget, the Government pledged to look at options to mitigate the cash flow effect of Brexit but there are no specific proposals yet.
Two further VAT changes are expected in 2019. Firstly, the EU's proposed Single VAT Area reform is scheduled for January 1, 2019 - before Brexit. B2B importers of goods from the EU will probably need to be approved by HMRC as a Certified Taxable Person (CTP) in order to carry on using the current rules. If a Brexit transitional deal sees the UK stay in the single market beyond April 2019, this may make CTP status a necessity.
Secondly, from May 1, 2019, businesses using the Simplified Import VAT Accounting Scheme (SIVA), which allows importers to use a duty deferment account without providing a financial guarantee, will be subject to more stringent eligibility requirements.
Businesses buying goods from the EU can prepare for Brexit now by setting up a deferment account or using customs warehousing arrangements to settle payment of import VAT (and customs duty).
The single VAT area and SIVA changes can both be addressed by applying for ‘Authorised Economic Operator' accreditation, which provides faster customs clearance and approvals for goods as well as automatically meeting approval standards for SIVA and CTP. However, the application process for AEO already takes around six months so it is important to apply soon so that you are ready for 2019.
In an effort to prepare our members for the new data protection regulation, we've reported on the changes through our various channels and have run a number of regional workshops. As a result, you may understand your responsibilities to protect your customer's data, but are you also aware of your Human Resources responsibility?
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