In its technical notice, VAT for businesses if there’s no Brexit deal, published on August 23, the government has conceded that upfront payments of VAT will not be feasible for businesses and has pledged not to impose a system which would require this in the case of no deal.

The notice says:
“If the UK leaves the EU without an agreement, the government will introduce postponed accounting for import VAT on goods brought into the UK. This means that UK VAT registered businesses importing goods to the UK will be able to account for import VAT on their VAT return, rather than paying import VAT on or soon after the time that the goods arrive at the UK border. This will apply both to imports from the EU and non-EU countries.”

The TTF has been calling for the government to preserve the existing VAT payments system for imports from the EU after Brexit, or to put in place a new system maintaining these benefits. As things stand, the timber sector faces a £1bn Brexit VAT bill from next year. Under current rules, companies can spread the payment of VAT on EU imports, giving time for goods to be sold before having to pay the tax. This eases cash flow, especially for small businesses. Until yesterday there had been no clarity about the future VAT payment system once the UK leaves the EU and its VAT area. Thousands of timber importers could have been obliged to pay 20% VAT rate upfront, causing huge cost and cash flow implications for TTF members. The UK timber industry is mainly populated by SMEs, many of which are operating on tight margins, making them especially vulnerable to the effects of upfront VAT changes.

“I am pleased that the government has listened to the timber industry and our campaign to ensure that our sector is not penalised by a VAT bombshell after Brexit, said David Hopkins, TTF managing director. “Yesterday’s assurance regarding the VAT payment system in the event of a no-deal Brexit is very welcome. We now look forward to working with the government as they negotiate with the EU regarding the Brexit deal, to ensure that similar assurances are enshrined in that deal.”