Value Added Tax (VAT), in layman’s terms, can be defined as a tax that is levied on the consumption of various goods and services. Generally, any business would charge VAT on its customers based on the sales that they have generated. It will then remit the VAT that it has collected, to the National Tax Authority, thereby compensating the VAT that it has paid to its own suppliers, as an input tax. Thus, businesses, at each stage of the production of a particular product or service, would collect the tax. So you see, it’s a complicated process and that is the reason, businesses appoint professional accountants from quality service providers to manage the VAT related issues. Biz Accounting Solutions Ltd is home to professionals who help businesses in VAT collection and other associated issues.
The Govt. of the UK was compelled to introduce VAT when it joined the European Economic Community (EEC) on 1st January 1973. The Purchase Tax that was in force before that on luxury goods got replaced by the VAT. The 6 original EC members then harmonised their VAT regimes, to reduce any discrepancy of export refunds. This gave all the member states a fair amount of competitive advantage, but that generated an economic distortion.
How VAT operates in the UK?
In the UK, the VAT system follows the parameters and directives of the European Union. However, these VAT directives do not apply to the members of the EEA or European Economic Area. Nevertheless, with Brexit, things are going to change.
Will Brexit have its effect on the UK VAT Structure?
The experts believe that the Govt. of the UK is likely to enjoy more flexibility on the VAT structure, following Brexit. Thus, it is time for our professional accountants, who are working for various businesses, to bear more responsibility and help our clients to come to terms with these new flexibilities. These potential flexibilities that are created by Brexit imply that the UK Ministers will come under intense pressure to reduce the VAT rates and bring in more reform of the exemptions. This will lead to more confusion and further complexity. Surely, in these doldrums, the businesses, more so the medium and the smaller scaled ones are likely to face a lot of problems. Here is where our professional accountants in Reading and other places of the UK will come in handy with their able guidance.
The UK has already a fairly higher registration VAT threshold at £85,000 and it will continue to be so till April 2022. However, the UK courts of Law may have to intervene and take into consideration the previous decisions by the Court of Justice of the European Union (CJEU) while deciding the fate of the VAT cases. What impact it will have on the VAT is still something to be seen, but this is all set to trigger off another set of confusions, for sure, making the life of the professional accountants quite harder and more hectic.
The Big Change
The biggest change that Brexit is going to bring is in the way VAT will be charged while trading with the 27 remaining EU states following Brexit. The scale of that change is not clear, but will entirely depend on the final outcome that is negotiated by the Governments of these states. In the case of domestic transactions, the seller would charge the VAT on the buyer and then subsequently will pay that money that is collected to the Tax Authority. At present, VAT is not charged on the supply of goods and services between two or more members of the EU.
However, with the UK coming out of the EU VAT scheme, it will become an outsider, more so, a third country. In other words, the way the businesses will manage the VAT on goods and services within the EU block will not be the same again. Sellers will not levy any VAT any more, but the buyers will have to pay VAT to the HMRC or HM Revenue and Customs at the point of Import, along with every custom duty, whatever applicable.
Thus you see, things in regards to VAT are only going to be more complicated. And thus, every business needs to get in touch with seasoned accountants serving their clients in Wokingham and any other place across London and other regions of the UK for proper guidance in the period of uncertainty.
We at Biz Accounting Solutions Ltd are proud to be home to some of the best accountants and VAT experts who will be able to guide you through the days ahead. Thus, if you are a business owner, we would suggest you get in touch with us at 44 7877224964 or 01189 693061 during our office hours for further details.