Supply chain · 25 January 2018

Cross-border trade bill could land importers 41, 500 up-front VAT charges

At least 132, 000 businesses trade solely with EU countries
Thousands of firms are braced for up-front VAT charges on 212bn worth of EU imports, as new research highlights the cash flow challenges facing business owners after Brexit.

The report, from small business accountantaccounts and Legal, warned that Britain’s removal from the EU VAT area would create short-term cash flow issues for importers and increase the administrative burden for UK customs.

Currently, business owners can register with HMRC to import goods from the EU VAT-free, adding it once goods are sold to the customer and reclaimed later.

However, under the terms of the cross-border trade bill, currently being debated by policy makers, the UK will be treated as a non-EU member, meaning 20 per cent VAT will be added to all goods as they cross the border.

With the total value of EU-imported goods reaching 212bn in 2017, Accounts and Legal warned that 205, 000 business owners buying goods from the bloc face up-front VAT charges worth 41, 500 (based on a typical VAT cycle) a figure the firm warns must become part of their working capital after Brexit.

while this does not actually cost the company money in the long-term, it could cause cash flow issues in the short-term, particularly if the VAT bill is a sizeable one, explained the report’s author and senior accountant at Accounts and Legal, Keir Wright-Whyte.

when the new legislation comes into play, it will be vital for businesses in the UK to reinvent their?cash flow forecastingif they are to avoid major problems down the line.




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Praseeda Nair is an impassioned advocate for women in leadership, and likes to profile business owners, advisors and experts in the field of entrepreneurship and management.

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