LONDON: The UK is scheduled to leave the European Union by force of law on 31 March 2019. This is based on the two-year notice period started by the triggering of Article 50 of the Lisbon Treaty. However, all sides agree that, given this is only 12 months away and with no sight of a new trading agreement, this needs to be extended.
To allow businesses on both sides of the English Channel to prepare and adjust for the UK leaving the EU, a potential 21-month transition period following 31 March 2019 now looks likely to be agreed.
This would mean the UK being outside the single market and customs union from 2022. A simultaneous exit from the EU VAT regime threatens many thousands of UK and EU trading businesses.
Based on Avalara’s recent survey of e-commerce businesses selling into the EU, over 27,000 small e-commerce retailers will have to spend over £720m per annum in new VAT compliance charges just to keep selling into the EU.
Once the UK leaves the EU, it becomes a ‘third country’ for VAT trading purposes. This will have a huge impact on importers and exporters and will have a number of significant implications
The first will be an obligation for small e-commerce companies to VAT register immediately in any EU country where they are selling. This is due to the loss of the EU distance selling threshold simplification.
Secondly, we will see a 20% UK import VAT bill on all goods coming in from the EU. This is recoverable but will add burdensome new paperwork and processes.
