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Preparing for Brexit

VAT and business trading

Brexit will bring changes on both the VAT and customs front and it is vital that businesses take action to prepare for these changes. In this article we consider some of those changes and what business should do to prepare.

 From a VAT perspective, the current UK VAT system should not change significantly, post Brexit, although the UK will be able to make changes to its VAT laws and systems as it will no longer be the subject of EU legislation and case law.  From an Irish and EU perspective the UK will become a ‘third country’ and where once there were intra-Community transactions between Ireland and the UK, there will be exports and imports which may result in cash flow implications in respect of VAT at the point of entry, changes in documentation requirements and changes in administration, including the potential of a VAT registration requirement for businesses in the UK, or indeed other EU countries, which previously may not have existed. 

 However, it is likely that an even bigger impact for businesses trading with the UK will be on the customs side particularly for those businesses who, at present, are operating only within EU Member States and so have not previously had to navigate the world of imports/exports and customs formalities.  The imposition of customs duty on sales of goods to or purchases from the UK brings with it very significant challenges for Irish business trading with the UK or even transiting goods through it. The current Brexit negotiations, between the EU and the UK, which are at a very early stage, do not involve discussion on the Single Market and the Customs Union and the EU 27 will only decide in October, at the earliest, when trade talks with the UK can begin.

 Notwithstanding the lack of developments at EU level, at this stage in the Brexit timetable, businesses should have identified the VAT and customs duty issues that could affect them and whether those issues could generate additional costs, increase in the administrative burden, require changes to IT systems or internal procedures. How should contracts with UK suppliers and customers provide for the VAT and customs landscape post Brexit? Will sales to the UK be subject to UK customs duty and if so how will this impact sales? If VAT is payable on goods purchased from the UK who will fund this import VAT?

 As we move towards the Brexit deadline businesses need to put in place steps to be ready for the changes that Brexit will bring.  Our advice is to plan for maximum change and to act now. 

 If you would like to discuss Brexit and the implications for your business please do not hesitate to contact your Deloitte contact. 

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