The HMRC has been asked for a clarification on the new proposed VAT legislation and what it means for companies. The legislation is looking to change the way in which imports from the European Union nations would be treated once the drafting of Brexit is completed.
The second reading of the proposed Customs Bill is due to happen at the House of Commons this week. The bill might force several thousand companies to make an upfront cash VAT payment to HMRC.
Morgan to propose an investigation
The Treasury committee chair, Nicky Morgan, said that she would be contacting HMRC and make a suggestion regarding the matter being investigated by MPs. She added that with the Brexit coming closer, they are starting to slowly comprehend its reality and how it may hurt.
Under the current legislation, the term “acquisitions” is given to the imported goods from the European Union for tax calculation. No payment of VAT is made till the products get sold and are paid for by the end customer.
However, unless the United Kingdom decides to remain a part of the Customs Union, the EU imported goods would be treated the same as other imports post Brexit. This means that there will be a VAT imposition pending by the fifteenth day in the forthcoming month.
According to the British Retail Consortium, there is a concern regarding the lack of a government strategy for VAT. The chief executive of the commission, Helen Dickinson, was reported saying that it would be naïve to think that timings could be easily brought forth on such massive cash amounts.
For future planning, it is important for retailers to be aware of their tax liabilities and the measures that could be taken for avoiding a hit to the incoming cash with new costs for European imported goods and increased potential price burden for regular shoppers.
In the November Budget, the Treasury had acknowledged that businesses would gain from delayed VAT accounting when importing EU goods. The government is aware that such arrangements are critical for businesses since they provide cash-flow benefits.
The Budget had stated that the government would keep this in mind when it considered proposed changes after EU exit. It would also assess various options for mitigating all cash-flow effects for businesses. Further, the Budget made it clear that ministers were looking to let the tax structures remain as close to the existing ones as possible.