The 2016 Brexit vote had a significant impact on the world economy. Much has been made of the ‘hard vs soft’ Brexit but at the time of writing it looks like ‘hard’ may prevail, writes Adam Lloyd, VAT consultant, Haines Watts.
The 2016 Brexit vote had a significant impact on the world economy. Much has been made of the ‘hard vs soft’ Brexit but at the time of writing it looks like ‘hard’ may prevail.
The Government recently announced that free movement of people will finish post Brexit and it’s therefore highly likely that the free movement of goods will also end. If this happens, we’d see a return to all incoming and outgoing goods being cleared via the same procedures that are currently applied to non-EU shipments. Administrative procedures such as EC sales lists and Intrastat returns would also stop.
Europe’s reach will therefore end at the British Channel and neither the UK taxpayer nor the Government will be forced to follow future European Court of Justice rulings.
VAT will be under the sole jurisdiction of the UK Government and lawmakers going forward and, while existing EU case law precedent is to be preserved within UK law, it remains to be seen whether some of these decisions will withstand fresh challenges once the CJEU no longer has the final word.
Leaving the EU may allow a raft of ‘common sense’ rules to be introduced in the UK that aren’t permitted currently. For instance, the Government could remove VAT on feminine hygiene products, which isn’t allowed under EU Law.
With the threat of financial institutions relocating outside the UK, now would be an ideal time to start talks on the potential VAT benefits and supplier advantages of staying put. Furthermore, the UK exemption for financial products and other services may end at the UK borders, bringing VAT savings to exempt service providers who offer cross-border products.
The post-Brexit VAT world remains unclear but one thing is for sure, VAT is here to stay. It’s the second highest source of Government revenue and the ultimate stealth tax. Watch this space.
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