With ongoing negotiations between the UK and the EU, changes in taxation are inevitable, but to what degree? We have highlighted below the key potential changes in taxation you need to look out for:
What is VAT?
VAT or ‘Value Added Tax’ is an indirect tax that is levied on goods and services at every point of the distribution cycle. Currently, businesses add VAT onto the retail price to the consumer to offset the VAT they have paid to their suppliers. At each stage of ‘value’ tax is collected. With VAT previously introduced when the UK joined the European Economic Community (EEC) in 1973 this is now open to change.
How will VAT change post Brexit?
After the transitionary period has ended, the UK will leave the EEC and will no longer be obligated to enforce the VAT directives. In theory this means that VAT could potentially be abolished for good. This is unlikely to happen due to political and financial pressures however the changes in regulation means that the UK will be in control and may look to reduce the current rate of VAT for certain goods and services or look to reduce across the board.
How will this affect my business?
In addition to some business making import-export declarations for the first time there may be further changes in VAT submission.
‘The payment of VAT at the border will have potential cash flow consequences which the UK government proposes to mitigate for imports, through the introduction of postponed accounting for import VAT. This would shift the VAT accounting and payment away from the border to the VAT return. Postponed accounting would also apply to rest of the world imports, not just those from EU countries.’ Source: www.instituteforgovernment.org.uk .
If this happens businesses that are importing goods into the UK may need to enforce changes in their standard operating procedures in order to adhere to new guidelines.
UKSGBridge actively works with partners to help you get companies prepared for a post Brexit world. Whether you are a Singaporean company looking to expand into the UK or a UK company looking to explore opportunities in Singapore , do contact us to see how we can help or visit our blog more resources.