VAT changes to hit UK firms after Brexit

Businesses will be forced to pay the tax upfront, creating cashflow burdens that could cripple small firms

British importers face a heavy tax burden after Brexit
(Image credit: Matt Cardy/Getty Images)

Changes to how companies pay VAT will result in more upfront costs for businesses after Brexit, under controversial legislation to be considered by MPs today.

More than 130,000 British companies will be forced to pay VAT in advance for the first time on all goods imported from the EU after the UK leaves the bloc.

The VAT changes spelled out in the Taxation (Cross-Border Trade) Bill, one of a string of Brexit laws passing through parliament, “are causing uproar among UK business groups, which say that they will create acute cashflow problems and huge additional bureaucracy”, reports The Guardian.

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Labour and some Tory MPs said the only way to avoid a VAT penalty would be for the UK to stay in the customs union or negotiate to remain in the EU VAT area.

Currently, companies that import machine goods or parts from the EU can register with HMRC to bring them into the UK free of VAT. However, without a deal with Brussels, importers will have to pay the money upfront and then recover it later, creating a cashflow problem. It could seriously impact smaller businesses with less disposable funds to cover the immediate tax burden.

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