Regardless of the Brexit deal that is done, it is certain that the cross-border VAT and duty environment will change.
Our specialist VAT Partner, Steve McCrindle, highlights five key areas you should be thinking about now to ensure you protect your business.
1. Review your supply chain
Check the VAT status of all the parties in your supply chain as their status could affect your own businesses VAT treatment by the authorities. Similarly, it is sensible to ask your suppliers to ensure that they also check the VAT status of their own supply chain, so that you limit any potential ‘domino’ effect on your business.
Are the contracts you have with suppliers and customers onerous in the post Brexit business environment, and therefore require amendment or replacement?
2. Evaluate your EU operations
Have you considered whether you will continue to keep offices, manufacturing plants and warehousing space in EU countries, or whether you should move some of your UK activities into the EU?
If you’re an importer of goods from the EU, you may want to establish if the supply chain will still be fit for purpose, cost effective and not crippled by onerous border controls.
The same applies if you are an exporter to the EU.. Will your post Brexit supply chain be fit for purpose?
If you source products within the EU only to assemble goods in the UK and export back to Europe, what would the best option be?
Time is running out if you need to give notice on or source new facilities – research your options now and ensure you have the funds, resources and capability to respond.
3. Review your insurance
If, in the worst-case scenario, your goods are held at border crossings or ports, does your current insurance policy address losses incurred because of Brexit?
Insurers are likely to be factoring claims into their premiums – the sooner you review your current cover and make the necessary adjustments the better.
4. Assess your IT systems
You are already faced with having to implement systems and processes for MTD (Making Tax Digital). The new process goes live for VAT registered businesses on 1 April 2019.
It may be the case that HMRC will have to introduce new digital systems to collect duties. A new system, CDS, is being prepared by HMRC to replace the CHIEF system presently.
Are you in a position to respond to this requirement quickly? Do you understand how your existing systems are set up and what the potential implications could be? Do you have the right staff in both your IT and finance teams to manage any changes to VAT processing and payments?
5. Model cash flow scenarios
If your imports or exports are held up at borders or ports, how long will you be able to fill orders? If you are required to make VAT and Customs payments upfront at borders, do you have sufficient funds to do so, and for how long?
This could also impact on any financing you rely upon – do you know what your lender’s position is and how flexible they will be if you run into cash flow issues? Best to ask now than wait and see.
Making a Brexit VAT Plan
The outcome of Brexit negotiations remains uncertain, that much is evident. Despite the Government’s intention to secure a ‘workable deal’, the Government Department responsible for negotiating Brexit terms has issued a pack of guidelines regarding what may happen in the event of a no deal. You can read their guidance here.
One thing is clear: VAT and duty are valuable to HMRC and trading rules will be enforced regardless of the outcome. So taking steps to understand the potential impact and put in place contingencies is crucial.
Our London team of specialist VAT advisors have developed a practical VAT and duty Impact Assessment process. We can help you understand what your VAT risks are post Brexit and therefore inform strategies for mitigating risk and protecting future operations.
Speak to one of our VAT advisors today about the VAT impact of Brexit on your business.