Brexit: Deal or No Deal?
The dreaded ‘B’ word, hasn’t been mentioned by us until now. That’ll be “Brexit”, then. Up to now, we have resisted temptation to even utter the word. But we are getting a bit close now to what may happen: Deal? No deal? No Brexit post Referendum #2? Don’t laugh at No Brexit, it could happen. We cover all potential political angles here.
VAT’s NO DEAL
The government has announced through guidance dated in August 2018 that if there is a
No Deal Brexit, businesses importing goods from the EU or from outside the EU will not have to pay import VAT as soon as the goods arrive in the UK.
This will allow importers to account for the VAT later on their VAT returns and would give positive help because it will aid help cash flow. For example if you bring goods in on 30th June 2019 you’ll have at least until 10th August 2019 to pay, if you use direct debit with a June VAT quarter date. If you imported on 1st April 2019 you’d have until 10th August 2019.
HMRC is saying though that customs declarations and other duties will still be required for imports from the EU, in the same way as currently applies when importing goods from outside the EU. An import declaration will be needed and customs duties must be paid. Customs checks may also be performed at the place of importation.
All goods entering the UK as parcels sent by overseas businesses will be liable for VAT unless they are zero-rated or exempt from VAT. For parcels valued at £135 or less, a so called “technology-based solution” will collect VAT from the overseas business selling the goods into the UK. How this would work is not clear, yet.
What future Techie Tax Breaks?
Small and medium businesses involved in research and development get very generous tax relief at the moment in the UK. Up to one third of qualifying costs can be recovered through the tax system. The No Deal prospect is leaving some business owners pretty concerned about the future of tax relief.
On the basis of not having that crystal ball, no one knows how the ‘B’ word will affect tax relief. This type of tax relief like many other tax issues, will need to be resolved.
This is because the tax relief for small and medium business is treated as notified state aid. It is “notified” to the European Commission as it is considered generous enough to have the potential to distort competition amongst member states. If Brexit happens, the UK will no longer need to consider state aid rules, leaving the Treasury free to dictate the availability and extent of the relief.
In the 2017 Autumn Statement there were indications of an ongoing commitment by Government to support the relief. It appears that this tax relief would be a central component of the UK’s policy to encourage this research and development activity.
The two current schemes for this (including the one for small and medium business) may need to be harmonised and this may lead to more simplicity for small enterprises that receive grant funding.
In the meantime, tax relief for research and development is very much available. If you carry out such activity, it may qualify for generous tax breaks.
If you would like guidance and support, including the preparation of tax claims, please
contact us.
