Vital VAT actions for businesses as Brexit-shaped sword of Damacles hangs perilously above

The New Year has arrived but with it comes trepidation and uncertainty for businesses across the land, with Britain’s EU withdrawal agreement hanging by a thread.

The possibility of the ‘no deal’ scenario dangles perilously over us like a sword of Damacles. Indeed, the Government changed its official line, just before Christmas, that it was ‘unlikely’, removing the word from some of its guidance papers.

The chances of the UK leaving on 29 March 2019 with no transition or new arrangement in place, appears to have risen considerably, as Parliament remains totally deadlocked.

No consensus, no deal

In a matter of days, the House of Commons looks like it will finally be set to vote on Theresa May’s deal, including the highly contentious Irish backstop. This could, however, just cause even greater anxiety and confusion because unless something dramatic happens, MPs will be tossing it aside.

It is even more important therefore, for businesses to note the announcement from HMRC in December about VAT. This went somewhat under the radar, with all of the rigmarole surrounding the no confidence leadership challenge, which failed to dislodge Mrs May as Tory leader, not to mention the daily shenanigans in the Commons during the Brexit debate. So much has been discussed and debated but here is what you need to know right now.

What businesses need to know now

This letter from Jim Harra, Deputy Chief Executive of HMRC, explains more about preparation for a no deal scenario, specifically on VAT.

It was sent to 145,000 businesses around the UK and asks these firms to take three actions now:

1. Register for a UK Economic Operator Registration and Identification (EORI) number via www.gov.uk/hmrc/get-eori. An EORI number is needed:

  • If you want to continue to import or export goods with the EU after 29 March 2019, if the UK leaves the EU without a deal
  • Before you can apply for authorisations that will make customs processes easier for you


2.
Decide if you want to hire an agent to make import and/or export declarations for you or if you want to make these declarations yourself (by buying software that interacts with HMRC’s systems). You must do this if you want to:

  • Declare through an agent, contact one to find out what information they’ll need from you
  • Use software to make declarations yourself

3. Contact the organisation that moves your goods (for example, a haulage firm) to find out if you will need to supply additional information to them so that they can make the safety and security declarations for your goods, or whether you will need to submit these declarations yourself.

Businesses should be on the look out for further news because the Government said it would write to them again to let them know what further actions they will need to take and when.

What happens now?

Looking at the Parliamentary arithmetic and the lack of any viable plan B that would attract cross party support, the current crisis could yet lead to a whole range of dramatic outcomes and very soon, including the collapse of the Government, a General Election or even a second referendum.

‘No deal’ preparations are likely to ramp up even further. The UK and EU both published details before the festive break on various matters.

So, it’s going to be vital for business people to keep on following the news and see if any solution emerges in coming weeks.

It looks to us though like it’s going to be a bumpy ride. Best be prepared!

See how KashFlow works with your business and your books