Leading audit, tax and consulting firm RSM comments on the VAT and EU trading implications of ‘No Deal’ Brexit papers

Commenting on the Government’s paper on trading with the EU if there is no Brexit deal, Brad Ashton, customs and international trade partner at RSM said:

‘The ‘No Deal’ customs paper tells us nothing new, but it underlines the reality that for businesses trading goods with the EU, the process will become more costly and far more complex. Treating trade with the EU in the same way as existing non-EU trade means it can’t by definition be frictionless.

‘Given there’s only five months between the October summit and Brexit day, timing will be incredibly tight. During that time, the estimated 145,000 businesses that trade solely with the EU will potentially need to confirm and implement processes to engage with the customs declaration process, many for the first time.

‘Amongst other requirements, this will mean registering for an Economic Operator Registration and Identification (EORI) number – a requirement to be able to make import and export declarations, engage a service provider who can submit customs declarations to Customs, establish the correct customs classification and value of imported goods and prepare to absorb any additional costs arising from customs duties.

‘There is some welcome confirmation of facilitation measures.  In addition to good news on how import VAT will be handled in the case of a no-deal Brexit, the notice has confirmed existing customs facilitation measures, such as customs warehousing and inward processing etc… will continue to be available.  Conversely, the fact the UK will lose access to existing free trade agreements with in excess of 30 countries and cease to be able to distribute goods subject to excise duty under the pan-EU duty suspension system is inevitable.

Making the correct, informed choices now becomes critical.’

Commenting on the VAT paper, David Wilson, a VAT Director from RSM said: ‘We were sceptical as to whether the ‘no deal’ VAT paper would be fit for purpose, but in fairness it does identify many of the issues which will impact businesses and consumers. However, to comprehend the full administrative and bureaucratic burden of treating EU trade as ‘imports and exports’, the VAT paper cannot be read in isolation and must be considered in conjunction with other guidance notes.

‘One major development is the recognition of the potential negative cash-flow implications arising from import VAT, the increased costs from customs duty, and the supply chain delays associated with VAT and customs clearances which UK businesses may face on leaving the EU.

‘In an attempt to mitigate this particular issue, the government has proposed that ‘postponed accounting’ for import VAT will apply to both EU and non-EU imports.

‘Although this wouldn’t address the payment and clearance for customs duty, it would mean that, instead of paying the import VAT at the time of importation, import VAT would be accounted for and recovered on the same VAT return, much as it is now for intra-community supplies. Whether this will result in any additional administrative ‘red tape’ remains to be seen – more guidance setting out further detail on accounting and record keeping requirements will be issued in due course.

‘The paper also recognises that consumers will also be subject to the additional cost of import VAT being applied to goods purchased from suppliers in the EU. The proposed ‘simplification’ for such goods valued at less than £135 is that the overseas supplier will use a ‘technology-based solution’ to charge and collect UK VAT at the point of purchase. Whilst the proposal is to “ensures the process of paying VAT on parcels does not become burdensome for UK consumers and businesses”, unfortunately, the paper doesn’t address whether:

  • such a technology-based solution is available and tested to the requisite standard (the EU’s mini-one stop shop ‘MOSS’ solution will no longer be available to the UK);
  • EU suppliers would be able and willing to use such ‘technology-based solutions’, and the cost to them of doing so;
  • any such solution would be subject to reciprocal arrangements for supplies from the UK to EU customers;
  • customs and/or excise duties payable by UK customers would similarly be collected by the supplier, or payable by the customer before delivery.

‘There is little doubt that a ‘no deal’ scenario will have significant consequences for businesses, consumers and HMRC. Whether the publication of the ‘no deal’ technical notices will help or hinder the understanding of these consequences remains to be seen.’


  • RSM is a leading audit, tax and consulting firm to the middle market with nearly 3,500 partners and staff operating from 35 locations throughout the UK. For the year ending 31 March 2017, RSM generated revenues of £319m. RSM UK is a member firm of RSM International – the sixth largest network of audit, tax and consulting firms globally. The network spans over 120 countries, 800 offices and more than 43,000 people, with a fee income of more than $5bn.

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