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Brexit transition period extended to December 2020

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EU and UK negotiators this week agreed on a 21-month Brexit transition period. This means the UK would leave the EU VAT regime on 31 December 2020. The European Commission has published an updated draft of the withdrawal agreement, including agreement in principal on the terms of transition.

Alan McLintock, chair of CIOT’s indirect taxes sub-committee, commented: ‘We urge the UK and EU not to waste the period up until December 2020 and to get down to agreeing what form the post transition relationship will take’.

McLintock added: ‘UK and European Union business will welcome the continuity proposed in today’s agreement. It suggests that for most businesses it will be business as usual in cross border trade after March 2019’.

Richard Asquith, VP global indirect tax at tax technology company Avalara, sums up the implications for UK businesses outside the EU VAT regime, including:

  • importers facing a UK 20% import VAT bill and cash flow recovery admin on all goods coming into the UK;
  • imposition of an extra £720m in VAT compliance costs on up to 132,000 small businesses;
  • irrecoverable duty costs of 4% on average for importers of goods into the UK from the EU;
  • UK sellers of digital services losing their right to the EU MOSS single VAT registration and filing; and
  • UK exporters of goods to the EU having to appoint special tax representatives for import tax reporting in 19 EU states.
Issue: 1392
Categories: News , Brexit