The issue of VAT in a post-Brexit landscape has emerged as a potential headache for small businesses trading with the EU, as recently highlighted on AccountingWEB.
The blockbuster cross-border trade bill aims to create the necessary tools with which the UK can operate its trade policy once the divorce is settled, and is a central legislative pillar in the Brexit process.
Leaving the EU tax area is at the very heart of this bill. It’s a particular point of emphasis for pro-Brexit MPs, who say tax and financial sovereignty is a central reason for leaving the EU to begin with.
But, like pretty much everything Brexit related, it’s not been smooth sailing. Primarily due to a VAT change that’s nestled deep within its pages: import VAT will be charged on all imports from outside the UK. For the 132,000 businesses currently trading with the EU, this is a big change.
Basically, it means paying VAT upfront, over and above any duties incurred. That money can be reclaimed, but if you’re currently filing quarterly VAT returns it can be a cashflow headache. And there are doubts that HMRC could cope with everyone filing monthly. Some critics also fear that the reliefs currently in place aren’t robust enough.
If you’re interested in the full story, you can read it here.
The cross-border trade bill in question has passed its second reading in parliament and is now heading to the committee stage. That means if you have any concerns or expertise on the matter, you can now submit your views in writing to the House of Commons Public Bill Committee which is going to consider the bill.
But hurry, there’s not much time; this bill is flying through Westminster. The Committee is expected to meet for the first time on Tuesday 23 January 2018; it will stop receiving written evidence at the end of the Committee stage, which is expected to be not later than 5.00pm on Thursday 1 February 2018.
But the committee could conclude earlier, and once that happens, it won’t be able to receive any more evidence.
Henry VIII powers
One of the more peculiar side effects of the Brexit process is how it has propelled the so-called Henry VIII powers back to public relevance. The powers allow secondary legislation to amend the text of the primary legislation. Despite its despotic connotations, they are a relatively innocuous, if nifty, tool used by government used to avoid clogging up parliament with amendments.
But they've taken on a new potency as the government busies itself with the painful task of untangling the UK from thousands of EU regulations. The powers could allow the government to circumvent any filibustering by unhappy MPs.
The cross-border trade bill, in particular, will have a strong 16th-century flavour. As a report by the Lords select committee put it: "The Bill relies heavily on the concept of making law by 'public notice'. Paragraph 39 of the Treasury’s Delegated Powers Memorandum says that such notices will only make provision that is purely technical or administrative in nature."
A public notice means something published in a way that the person issuing it “considers appropriate”. There is no definition of what is 'appropriate' and it runs the gamut from full-page adverts in the national press to obscure notices in trade journals.
"For example, clause 24 allows HMRC by public notice to establish a system for making rulings to determine the customs code which should be applied to particular goods, and for determining the place of origin," read the Lords Select Committee report. "Both of these matters are liable to impact on the amount of duty that a person has to pay."
About Francois Badenhorst
I'm AccountingWEB's business editor. Feel free to get in touch with comments, tips, scoops or irreverent banter.