Scottish and Irish accountant bodies call for a change in timing of when VAT is paid on imported goods, after Brexit

May 25, 2018
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Major cash flow benefit of deferring VAT on imports, say accountants

Chartered Accountants Ireland and ICAS, the professional body for accountants in Scotland, have today (24 May 2018) issued a joint call to the Irish and UK governments to introduce legislation to alleviate the VAT burden on importers after Brexit.   

An often overlooked side-effect of Brexit is that VAT will become an upfront cost for imports between Ireland and the UK for the first time after Brexit, if the current law is not changed.  

UK and Irish businesses that regularly trade with one another will face a heavy cash flow burden as they will be forced to pay VAT, along with customs duties, at the time goods are imported and then recover the costs later.  Given that over €30 billion [i]of goods are exchanged between the two jurisdictions every year, this major change will cause significant upheaval to every business involved in imports.

Current situation

At the moment, VAT on imports between EU countries is paid when VAT returns are filed; which in many cases can be several weeks later.   Once the UK leaves the EU, the practice of paying VAT will differ drastically. 

Chartered Accountants Ireland President Feargal McCormack stated: “Any mechanism to minimise cash flow issues and time delays after Brexit is welcome.  An easy to implement solution would be to allow traders some extra time to pay the import VAT due on goods coming from the UK into Ireland.  Under the so called ‘postponed method of accounting for VAT’, importers would not have to pay VAT at the point of entry but instead declare the VAT in the next VAT return filed with Revenue.”

For many traders, an upfront VAT liability could be quite substantial and in reality could obliterate the cash reserves of a business.  Affected businesses are normally afforded the opportunity to offset certain VAT costs against the VAT liability, therefore reducing the amount due but an upfront VAT charge does not enable this reclaim until a later date. To counter this, Chartered Accountants Ireland has been calling for the adoption of a change in VAT law for the past 12 months.  

Mr McCormack said: “There are several existing precedents for this legislation and the postponed method of accounting for VAT would be relatively straightforward to introduce.  17 EU Member States have already adopted this method and many of these countries have land borders with non-EU countries. Postponing the payment of VAT makes practical sense for businesses that will already be challenged by the upheaval of Brexit.  An added advantage would be that this proposed system would largely reflect the existing VAT collection mechanisms for trade within the EU and companies are already very familiar with this method.”  

Charlotte Barbour, Director of Taxation at ICAS said: “UK businesses currently benefit from postponed accounting for VAT when importing goods from the EU, but this could change after Brexit. While the UK Government has recognised the benefits of postponed accounting it hasn’t yet committed to replacing it. Leaving the EU without a solution in place in either the UK or in Ireland would create cash flow costs and administrative burdens – all generated by Brexit – and none of which exist at present.”  


Notes to Editors

About Chartered Accountants Ireland
Chartered Accountants Ireland is Ireland’s largest and longest established professional body of accountants founded in 1888.  The Institute, which is an all-island body, currently represents over 26,500 members around the world.  The Chartered Accountants Ireland Brexit Action Group coordinates extensive lobbying and public information activities to help its members North and South of the border prepare for the departure of the UK from the EU.

Reference: Bryan Rankin, Marketing Manager, Chartered Accountants Ireland
T: (01) 637 7268 

About ICAS
For more information please contact:
Hannah Downie, ICAS Senior Digital Editor and Media Manager
T: 0131 347 0126

ICAS is a professional body for more than 21,000 world class business men and women who work in the UK and in more than 100 countries around the world. Members have all achieved the internationally recognised and respected CA qualification (Chartered Accountant). ICAS is an educator, examiner, regulator and thought leader. Almost two thirds of ICAS' working membership are in business; many leading some of the UK's and the world's great companies. The others work in accountancy practices ranging from the Big Four in The City to the small practitioner in rural areas.

ICAS has established a Brexit Advisory Group to understand members’ concerns, represent their views and interests, and assist them in understanding the impact of key issues on themselves and their organisations. The Group will contribute to and oversee the development of ICAS’ views in relation to the withdrawal of the UK from the EU.