On 22 January, the UK government submitted to the Parliament a statutory instrument – the Value Added Tax (Accounting Procedures for Import VAT for VAT Registered Persons and Amendment) (EU Exit) Regulations, SI 2019/60 – to implement the no-deal Brexit postponed accounting import VAT regime. The system was originally committed to in August 2018 in the case the UK Parliament failed to pass the Withdrawal Agreement settled between UK and EU leaders.
In the case of a ‘no deal’ Brexit on 29 March 2019, the UK would leave the EU VAT regime meaning imports from the EU would become subject to UK import VAT for the first time. This VAT would be due for payment before the goods were permitted to clear UK customs.
To alleviate this potential new cashflow burden, the statutory instrument permits the importer of record, who is liable for the import VAT, to instead account for the VAT in their subsequent UK VAT return using the reverse charge mechanism. This would mean no cash payment for the import VAT. The importer would need to indicate its VAT number in the import declaration documentation. The importer will be able use the existing VAT regulation (SI 1995/2518) estimation methodology to determine the value to declare.
The scheme could cost the UK £4bn because it must be offered to non-EU importers who currently have to settle their import VAT immediately. Major accounting software vendors and in-house IT teams will also be challenged to architect the changes in time for the 29 March.
Home >Articles > ‘No deal’ Brexit and the postponed accounting import VAT regime
‘No deal’ Brexit and the postponed accounting import VAT regime
On 22 January, the UK government submitted to the Parliament a statutory instrument – the Value Added Tax (Accounting Procedures for Import VAT for VAT Registered Persons and Amendment) (EU Exit) Regulations, SI 2019/60 – to implement the no-deal Brexit postponed accounting import VAT regime. The system was originally committed to in August 2018 in the case the UK Parliament failed to pass the Withdrawal Agreement settled between UK and EU leaders.
In the case of a ‘no deal’ Brexit on 29 March 2019, the UK would leave the EU VAT regime meaning imports from the EU would become subject to UK import VAT for the first time. This VAT would be due for payment before the goods were permitted to clear UK customs.
To alleviate this potential new cashflow burden, the statutory instrument permits the importer of record, who is liable for the import VAT, to instead account for the VAT in their subsequent UK VAT return using the reverse charge mechanism. This would mean no cash payment for the import VAT. The importer would need to indicate its VAT number in the import declaration documentation. The importer will be able use the existing VAT regulation (SI 1995/2518) estimation methodology to determine the value to declare.
The scheme could cost the UK £4bn because it must be offered to non-EU importers who currently have to settle their import VAT immediately. Major accounting software vendors and in-house IT teams will also be challenged to architect the changes in time for the 29 March.
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