VAT is one of the key issues for business post-Brexit. You need at present to assume that UK companies will have to pay VAT upfront when importing. As part of your contingency planning, you should therefore assess the potential impact of this change on your cash-flow.
Under existing rules, goods from the EU are referred to as “acquisitions” for tax purposes. No VAT is paid until the products have been sold to the final customer and paid for.
Unless the UK remains in the Customs Union, goods from the EU will have to be treated like all other imports after Brexit and will attract VAT by the 15th day of the following month.
The British Retail Consortium has said it is concerned about the government’s lack of strategy about the tax, which increased from 17.5% to 20% in 2011. Their CEO told the BBC in January that:
“It’s ridiculous to assume that it would be easy to bring forward the timings on such significant amounts of cash. Retailers need to know what their liability on tax will be, and what measures are going to be taken to avoid this hit to cash flow with new costs on importing goods from Europe and higher potential pressure on prices for ordinary shoppers.”