VAT News

Are Wales and the UK Brexit Ready?

17.10.2016

In our previous Brexit article in July see HERE we outlined some initial thoughts on the VAT implications that are likely to arise as we remove ourselves from the European Union. Through our engagement in discussions with The Wales Office and with representatives from HM Treasury we have continued to highlight the areas where this removal is likely to impact not just on possible VAT liabilities going forward but also on a business’s corporate structure, places of supply rules and day to day accounting systems.

In terms of what we know now the factual points to reports are:

  • The UK government have announced that they will invoke Article 50 of the Lisbon Treaty no later than the end of March 2017
  • A “Great Repeal Bill” will be put before Parliament to remove the European Communities Act from the statute book
  • At the same time a new Bill will convert existing EU law into domestic law.

While we remain a member of the EU we have been concerned as to the level of representation that HMRC would continue to have at the EU table as the implementation of the VAT Action Plan announced in April of this year rolls forward.  As we remain in the EU for the next two years at least the EU Action plan will directly impact the operation of VAT here in the UK. The Action Plan is specifically addressing measures to plug a E170bn VAT gap across the EU member states and will also be looking at measures to assist smaller businesses which sell online including consideration of the current VAT MOSS regime for services to be extended to those selling goods online as well.

All of these issues mean that it is important to ensure that HMRC remain engaged and included in discussions with respect to the Action Plan and we are pleased to report that we had confirmation from HM Treasury officials last week that this engagement by the UK in these discussions was on-going.  At that meeting we reinforced businesses’ concerns on changes to the Place of Supply Rules which will determine where they are based for VAT accounting purposes, as well as the withdrawal of simplification measures applicable to the movement of goods i.e. the “triangulation” rules which can currently be accessed to remove the need for VAT registrations in other EU member states.

The Treasury still had no answers on the impact for UK businesses on the ability to rely on European Court VAT judgements with any sense of certainty post Brexit – which does put a question on liability issues where the UK courts have referred cases to the EU for a decision which may only be delivered post Brexit – such is the time it takes for cases to proceed. Nevertheless, it was important to know that they appreciated the difficulty this lack of certainty created for the taxpayer.

We would encourage all our readers to consider any aspects where they would like to see a specific VAT change come about once the UK is able to enact its own VAT legislation outside of the EU, for example, an extension of lower rates of VAT to other goods and services or broader rights for VAT recovery. Now is the time to engage in lobbying through your relevant trade association or business representative body to ensure that both Welsh & UK ministers understand the full extent of the opportunities that organisations on the ground wish them to consider as they move through the Brexit process.