Huge new VAT burden is ‘yet another aspect of Brexit’ the Leave campaign never mentioned

Barrels of port – a product exported to the UK – in a cellar in the city of Vila Nova de Gaia in Portugal [Image: Alamy].

Let’s be honest – this never crossed the minds of Boris Johnson, Michael Gove, Nigel Farage or even Arron Banks.

But what is currently a “paper exercise” will become a huge cashflow problem from UK importers, the instant Brexit comes into force, if it is allowed to happen on March 29, 2019 as Theresa May demands.

As a result of leaving the EU-VAT area – which is what hard Brexiters really, really want, remember – importers will have to pay VAT up-front on machine parts or ready-for-sale goods brought in from the EU, putting them seriously out-of-pocket.

Possible measures to avoid the issue involve staying in the Customs Union or negotiating to stay in the EU-VAT area. Neither would be tolerated by Brexiters.

This Writer wonders how many of the businesspeople affected by the change voted for Brexit. How many of their employees did?

Did they know they would be putting their livelihoods in danger? That’s the logical result of this situation; businesses may not be able to fund the deficit created by the change, with disastrous results.

Ah, but Brexit was the patriotic thing to do, wasn’t it? We had to get away from being ruled by those terrible unelected Eurocrats.

But there never were any unelected Eurocrats forcing us into anything – that was a lie. And it isn’t patriotic to lead your country into a no-win situation.

More than 130,000 UK firms will be forced to pay VAT upfront for the first time on all goods imported from the European Union after Brexit, under controversial legislation to be considered by MPs on Monday.

The VAT changes spelled out in the taxation (cross-border trade) bill – one of a string of Brexit laws passing through parliament – are causing uproar among UK business groups, which say that they will create acute cashflow problems and huge additional bureaucracy.

Labour and Tory MPs and peers said that the only way to avoid the VAT Brexit penalty would be to stay in the customs union or negotiate to remain in the EU-VAT area.

The Labour MP and former minister Chris Leslie said that the VAT hit to firms was “yet another aspect of Brexit that the Leave campaign failed to inform the public about”. He added that he would be tabling urgent amendments to ensure the UK remained in the EU VAT area – a move that would enrage pro-Brexit MPs.

UK companies that import machine parts or goods ready for sale from the EU can currently register with HMRC to bring them into the UK free of VAT. They register the VAT charge and reclaim it later, all as a paper exercise. VAT is added to the price of the product whenever it is sold to the final customer.

Without a VAT deal with Brussels, importers will have to pay the VAT upfront in cash and then recover the money later, creating a huge outflow of funds before they can be recouped.

Source: UK companies will face huge new VAT burden after Brexit | Politics | The Guardian

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6 thoughts on “Huge new VAT burden is ‘yet another aspect of Brexit’ the Leave campaign never mentioned

  1. Masmit

    Do you not think uk government can do a VAT reduction for businesses, to compensate. This is another argument without knowing the deal.

    1. Mike Sivier Post author

      No – or at least I don’t think the government would. Tories only ever raise VAT.

  2. chriskitcher

    “Let’s be honest – this never crossed the minds of Boris Johnson, Michael Gove, Nigel Farage or even Arron Banks.”

    I personally believe that these idiots dont have brains so by default they do not have minds either.

  3. NMac

    The consequences of the nonsense that is Brexit is becoming clearer by the day. As yet nobody has told us what the economic benefits will be – not surprising as there aren’t any. The whole thing is going to be a nasty Tory engineered catastrophe for the working class people of Britain.

  4. rotzeichen

    Mike: this is the kind of cherry picking arguments that distort the reality on the ground, I have taken an example made by the EU to display how hidden vat cost are in fact passed on even though they say that those goods and services are exempt.

    Actual quote from a EU document:

    Public postal services are exempt from VAT. Consequently , people who send a parcel using the Post Office are not charged VAT, but the Post Office has paid VAT on its inputs: the vans it uses, the post boxes it buys, and all the other things. It cannot reclaim or deduct this VAT. So a part of the postage for sending the parcel represents paying for this ‘hidden’ VAT.”

    Whilst in the final analysis there will be increased costs and changes which adversely impact on us directly, there will also undoubtedly be advantages that the opposing side of the argument can place.

    Again we have trading deficits with Europe, if costs rise from Europe, then eventually, if we are to believe conventional wisdom, our home grown economy will in the long run grow, due the increase rising costs of imported goods.

    I really do believe these tit for tat arguments miss the over-riding factor, that on this side of the Channel we have Neo-liberal politicians driving through exactly the same policies that those on the other side of the channel are doing with exactly the same results.

    The issue is not what benefits we gain or lose, it is what are the Tories doing?

    What are the Neo-Liberal Tories in Europe doing?

    The answer to both is, the very same thing. So how do we change Europe, we simply can’t, because we can’t vote European politicians out of office, but we can get rid of these Tories.

    Europe is a complete distraction, but the Tories put it to a referendum and the result was to pull out, that is what will happen. What is now required is to mitigate harm both to us and Europe, that will not happen under the Tories which is why we need to work together in this country to get them out office as quickly as possible, every day they remain in office the more damage they will do.

    This last Quote defines why the Maastricht Treaty altered the basis that brought growth to the original members of the common market.

    “Subsidiarity is the principle whereby the Union does not take action (except in the areas which fall within its exclusive competence) unless it is more effective than action taken at national, regional or local level.

    The treaty explicitly recognised the principle of subsidiarity for the first time, but while some have interpreted this as prioritising the rights of national and local governments, others see it as giving more power to the EU.”

  5. corneleus51

    I also wonder how safe our aircraft industry is. What part will Rolls Royce play in Airbus engines after brexit? Will we still make wings? It id now the eighth year of austerity. Whilst the rich fill their boots and start looking to emigrate to a new planet they can destroy. Will the real good lpeople of this planet simply be left to die?

Comments are closed.