MPs say Brexit could lead to huge upfront VAT bills on EU goods and increase border delays

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ADRIAN DENNIS : Getty

  • MPs debated a bill in parliament yesterday which could force firms to pay VAT upfront on goods imported from the EU.
  • The British Retail Consortium says the changes could lead to border delays and cashflow burdens for UK firms.

LONDON – An influential group of MPs has written to the UK Revenues & Customs office warning that new Brexit legislation being considered in parliament could force firms to pay big upfront VAT bills and increase delays at UK borders and ports.

The government says the Taxation (Cross-Border Trade) Bill, which was debated in parliament on Monday, will end the existing tax regime “so that import VAT is charged on all imports from outside the UK” after it leaves the EU.

Currently, UK firms that import goods ready for sale from the EU can register with HMRC to bring them into the UK free of VAT. The government’s impact assessment for the Bill was released last month, and indicates that 132,000 businesses interact with the customs system through such rules:

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HMRC

Leaving the EU tax area is considered important by pro-Brexit MPs who say tax and financial sovereignty is a central reason leaving the 28-member state bloc.

But critics including pro-Remain MPs like Nicky Morgan say the changes mean UK firms will be forced to pay VAT up front on goods imported from the EU, which the British Retail Consortium says could significantly increase cashflow problems for firms.

Morgan, who is chair of the influential Treasury Select Committee, wrote on Tuesday to Jon Thompson, chief executive of Her Majesty’s Revenue & Customs (HMRC), to “seek clarification” on the legislation, which could force firms to pay VAT upfront on goods imported from the EU.

“Under the … Bill, firms would have to pay VAT upfront on goods imported from the EU before they can be released into free circulation in the UK,” Morgan said.

“The Government has already acknowledged that this would create an additional burden for businesses, and Autumn Budget 2017 committed to ‘look at options to mitigate any cash-flow impacts.'”

“I have written to HMRC to seek clarification on the costs to businesses and consumers arising from this legislation, the options being considered to mitigate these costs, and the likelihood of the UK participating in the EU VAT area as part of its end-state relationship with the EU.”