28 Sep What could Brexit mean for VAT?
The referendum vote in favour of leaving the European Union has left a lot of people wondering what will happen in different areas of business, tax and finance. As VAT is an EU centralised tax, this has left many businesses feeling the need for professional VAT advice and opinions on what exactly will happen after the UK has left the EU.
VAT in a post-EU UK
A few optimists have started to question whether VAT might be abandoned after the UK has left the EU. Unfortunately, the chances of this actually happening are virtually zero. Although VAT is essentially an EU tax, it is implemented by each member state in accordance with EU rules and will not cease to exist automatically after leaving the EU. The government is highly unlikely to abandon it by choice, and if it did this would likely be in order to implement an essentially similar replacement system.
What will happen is that the UK will no longer be required to implement VAT in a way that conforms to centralised EU requirements. The government will therefore gain a lot of newfound freedom on where and how it levies VAT on goods.
What might change
In truth, nobody really knows exactly what will happen to VAT after Brexit at this early stage. It is impossible to say what, if anything, the government may choose to do with its new freedom to reform the UK VAT system according to its own opinions on what is best. However, it is possible to say what the government will be able to do to VAT if it chooses once the exit process is complete, and therefore it is possible to identify the key areas of potential change.
Essentially, the government will gain the potential to implement reforms in all key areas of how VAT is levied and collected. The amount of VAT that is due, the bands that exist, and which goods fall into which bands will all be open to change once centralised EU requirements are no longer in force. In the coming years, it will therefore be very important for businesses to have access to expert and up-to-date VAT advice from a trusted accountancy firm, in order to stay up-to-date on any changes and ensure that their operations remain both compliant and efficient.