VAT: Planning for uncertainty
The UK’s intention to exit the European Union has thrown doubt on government and business plans for the future, not least the implications of Brexit on VAT and customs.
Despite being a relatively young tax in UK terms, introduced in 1973 following the UK’s joining of what was then the European Economic Community, VAT has wound its way into the system with ruthless efficiency.
Once it has departed the EU, the UK can technically set new VAT rates and rules that are currently not permitted under EU law, and complex areas such as financial services, property and insurance may benefit from reform.
But any changes at the moment are just pure speculation. According to Concur’s VAT specialist Matt Lewis, the only thing we do know for certain is that it’s going to take a long time to unwind. “No one knows how long it will take or what’s going to happen”, said Lewis.
“There’s going to be a lot of noise for a couple of years, but other than that there will be no concrete timetables or information until such time as we actually go through legal proceedings to start the process. And we’ve got two to five years to complete it.”
For VAT consultant and AccountingWEB writer Marie Stein, HMRC may baulk at major reforms to the VAT system for one simple reason – the sales brings in around £115bn a year for the government. “It’s basically a really good money spinner for the government. I understand it is about a tenth of the cost for HMRC to collect VAT than it does to collect income tax, because the businesses do the work.”
ICAS director of taxation Charlotte Barbour added that while short-term change was unlikely, in the longer term there will be no need for referrals to the European Court on VAT matters so in time this tax is likely to become a more distinct and bespoke tax in the UK.
Carry on VATing
While the UK continues to go through the process of extracting itself from the EU, getting the details right in terms of planning a VAT strategy remains crucial for businesses to succeed and prosper.
According to Concur’s Matt Lewis VAT touches every area of every business. “If you’re managing a company’s VAT”, said Lewis, “it’s one of the rare jobs where you’re involved with every part of the business, and by getting it right you can make a big difference to them.”
“You always have to have some kind of audit process around VAT”, continued Lewis, “whether you do that yourselves or outsource. The idea is that you want to make this cost-effective and also get the maximum out whilst also covering all your risk.
“I’m still amazed how many people contact us about VAT. I think it scares people because it’s a different language with different terminology. Once you get under the skin a little it’s pretty logical. Like anything legal-based dreamt up by governments over many years there are some quirks, and it’s the quirks that catch you out.”
To find out more about getting the details right around VAT, join Matt Lewis, AccountingWEB’s business editor Tom Herbert and Itelligence Business Solutions finance director Joe Serrurier for a live VAT strategy webinar. To sign up free of charge click here.