Brexit turned taxation and VAT into a very important topic but not many companies seem to understand the nature of the change in these two areas that is about to happen on the 1st January 2021.
According to Lionel Van Reet, Partner at PwC, Brexit with or without a deal will be the biggest economic earthquake that Europe has experienced in the last 50 years. His words are echoed by David Henig, Director, UK Trade Policy Project at European Centre for International Political Economy, who says: ‘After January 1st whatever we took for granted won’t be certain and many people do not understand that.’
Experts unite behind the fact that whatever the future relationship between the EU and the UK there will be customs checks and companies will either have to pay tariffs or provide certificates of origin. Additional problem is that businesses are unaware what documents they will need.
Experts say both sides would need to agree to a level-playing field as it is seen as an essential part of a trade deal. Unfortunately, most trade deals happen when both parties want to improve current relationships. With Brexit that is not the case and the EU and the UK are almost forced to negotiate. What adds to the uncertainty is the fact countries will have a tiny window to implement whatever, if anything, is agreed.
In the UK HMRC has prepared relatively well but some are worried that most European tax offices have done little to no preparation. Some like Belgium, France, and the Netherlands have added additional resources. Companies also have underestimated the importance of understanding how leaving the EU would affect them.
No deal will bring the greatest amount of work and many firms are just not ready. Thousands of companies export or import from the EU all the time but have no experience with customs. When the UK leaves the EU VAT Regime a lot of simplifications will be lost but experts caution that companies need to comply as authorities will begin checks. The first things organisations need to do is understand who is responsible for all declaration and see if a new VAT registration might be needed. ✷