With no agreement on tariffs, the UK will be treated as any other non-EU trading nation post Brexit. Consequently, UK importers would be required to make an up-front VAT payment in addition to any customs duties. This VAT payment will rank as input VAT that can be reclaimed from HMRC.
However, a problem will arise if an importer submits VAT returns quarterly. Any VAT paid to HMRC when they import goods will be authenticated by the issue of HMRC’s form C79 (this form is issued monthly). Once issued this can be treated like a VAT invoice and included on the next VAT return.
Accordingly, the importer will not be able to reclaim VAT until this form is received.
Affected businesses therefore need to add the VAT costs each quarter to their cash flow as it could be up to four months until a refund of import VAT paid can be recouped.
It is to be hoped that our government will respond to lobbying on this issue. Perhaps they will allow some form of deferment of the VAT payable or speed up the reclaim process.
To discuss this further, please contact DSC Chartered Accountants in Harrogate, 01423 560547 or Leeds, 0113 243 3559.