VAT a mess!

Despite having been allocated £280m of extra funds to deal with Brexit, in April HMRC announced it was culling or postponing over 30 projects, including some major ones. Several of these were aimed at improving the woeful service it provides to ordinary taxpayers who ring up or write to them, often in response to incorrect tax demands and threats.

HMRC’s central argument has been accepted by the Treasury Select Committee. It assumes that, given that the Cabinet can’t even agree on Brexit strategy never mind communicate that strategy to the EU, the final shape of key issues such as Customs and Northern Ireland will be resolved only at the last possible minute.

In turn this will mean HMRC will probably have to deal with a tidal wave of new, potentially very complex VAT legislation and customs changes, all to be implemented much faster than their standard projects are implemented. In other words, this will be a total shambles which needs lots of extra resources thrown at it to at least give it the appearance that it is not a shambles.

This sort of scenario was only too foreseeable in my view at the time of the vote and a major reason why I voted to stay in the EU. The costs of Brexit are only too immediate and only too real, whereas the benefits are very much jam tomorrow – if we get very lucky indeed.

If you are a business owner, in my view it is inevitable that in the mad scramble to change VAT and Customs processes outlined by HMRC in April, there will be opportunities and threats. There will be new unintended tax loopholes to exploit, but equally inevitably some businesses will just be “collateral damage” when changes in regulations are implemented in this rushed way.

It’s a mess. Especially if you are a business which exports or imports significantly, it will pay you to keep a close eye on how these changes will affect your products and services after we leave the EU.

Friday 25 May 2018