ACCA warns of MTD Brexit risk for small businesses
ACCA is warning of future risks to small and medium-sized enterprises (SMEs) because of the potential for a no deal Brexit to clash with the introduction of HMRC’s new Making Tax Digital (MTD) for VAT regime, and says the government must provide more detailed guidance
18 Dec 2018
The current system whereby companies in the EU are able to obtain VAT refunds from other member states through a single-market mechanism could cease if there is no deal on Brexit at 29 March 2019.
ACCA points out some member states, who would then be classified as third countries, may keep from refunding VAT to the UK as they currently do with US businesses and other third countries. In addition, a no-deal Brexit that identified the UK as a third country to the EU would require UK businesses’ IT systems to be changed in order to re-categorise them, creating additional complexity to VAT system.
The association says this further complication to VAT submission would clash with the government’s new online tax system, due to come into effect just three days later on 1 April, creating new rules and classifications to be adhered to within just 72 hours.
To prevent this clash creating disorganisation for small business owners, ACCA are calling for the government to be more precise than their current guidance released back in August and produce specific scenario plans for the various potential outcomes of a no-deal Brexit on VAT.
Chas Roy-Chowdhury, head of taxation, ACCA, said: ‘This issue is of considerable concern for SMEs with many businesses reviewing how they will adhere to a new digital system MTD in April.
‘A scenario whereby just three days prior to that, the UK might crash out of the European Union, with all the impacts that could have for those trading with the bloc would present unnecessary challenges for businesses.
‘We are stating that the government must be specific with the various outcomes of a no-deal and provide detailed scenario planning guidelines for businesses to follow.’
The House of Lords economic committee has already suggested the government delay the rollout of MTD by a year in order to avoid adding to the complexity many businesses may face post-Brexit.
Report by Pat Sweet