Future tax clash, that’s a certainty post-Brexit

Ongoing Brexit negotiations continue to generate uncertainty, but what is clear is that UK businesses are heading towards a tax clash when Making Tax Digital (MTD) and Brexit VAT changes collide.  

Ian Carpenter, head of indirect tax at RSM, said: ‘As the UK prepares to leave the EU without a deal, references to EU VAT are currently being removed from UK VAT regulation relating to any EU arrangements which will no longer be relevant post-Brexit.

‘Measures include the introduction of postponed accounting for import VAT, so VAT registered businesses can receive imports without prior payment of VAT (customs duty where applicable would still be paid). However, they will have to account for this within their VAT returns – highlighting a greater tax administration burden while a new standalone custom regime is agreed. 

‘Combine this with the transition to Making Tax Digital (MTD) for VAT which represents one of the most fundamental changes to the UK tax system in a generation and requires businesses with taxable turnover above the VAT threshold to keep digital records and submit VAT returns electronically. 

‘For most MTD comes into effect on 1 April, only two days after the UK plans to leave the EU - highlighting a clash of significant tax changes which UK businesses and HMRC will have to manage whilst adapting to any differing post-Brexit trading conditions. In an environment of uncertainty, this perfect storm of VAT administration is a certainty and businesses need to start preparing now to mitigate any future risks.’