Business as usual? : No-Deal Brexit and VAT

As the UK draws closer to the 31 October 2019, it seems more unlikely that the current government will not be able to reach a Withdrawal Agreement (terms that govern the UK’s departure from the EU) before its departure from the EU. The legal uncertainty has been further increased by the fact that the UK has not been able to negotiate an agreement concerning the future relationship between it and the EU. One industry that legal uncertainty will undoubtedly affect is the UK’s legal industry. As a response to this, the Law Society has published a set of guidance regarding VAT with a ‘No-deal Brexit’ for solicitors. Although this guidance is not prescriptive, they serve as a well-reasoned guide as to what could be post 31 October 2019 (the alleged exit day).

Having reviewed the Law Society’s guidance regarding VAT with a ‘No-deal Brexit’ it highlighted the following points:

  • The UK will be considered a ‘third country’ (a country not formally part of the EU) in relation to tax.
  • The UK’s status of being a ‘third country’ will affect the way in which UK service suppliers conduct their business now within the EU.
  • The UK government has stated that it would introduce import VAT on goods brought into the UK from the EU and other countries. It means that UK VAT registered companies importing goods to the UK, will not pay VAT for the goods as soon as they enter the UK, but they will benefit from a postponed VAT accounting system.
  • This will allow the UK to explore its trading opportunities with other countries around the world, and it increases certainty for businesses.
  • UK businesses will still be able to claim refunds for VAT, but they will have to complete this process as a non-EU member. Consequently, the UK business may need to use the process of the particular members state.

Therefore, one can see that although the UK government has prepared for leaving the EU with a ‘No-Deal’, the true effects of the extra administration processes, the lack of uniformity for businesses in dealing with various member states and the economic stance that the EU will take in conducting business with the UK will never truly be known until we reach that point. Subsequently, solicitors must stay ahead of this by understanding where the advantages and disadvantages now lie for their clients when conducting business as a UK company in the EU.

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