by Nick Robinson | Aug 04, 2016 | VAT
Now that the referendum has been and done, and the result is that the UK will – at some point in the near future – leave the European Union for good, there are a number of questions that need to be answered. They range from queries about exchange rates to whether or not our passports will still be valid. And one of those questions includes whether or not VAT will be affected by the Brexit.
The answer is that, certainly at first, nothing will change. This is because it will take two years from triggering Article 50 until the UK leaves the EU for good. After that time, however, things could certainly be different. At the moment, it is the EU that determines how VAT is charged and collected, but once we leave, it will be down to the UK Supreme Court to arbitrate any VAT disputes with HMRC. And what will happen to all of those decisions regarding VAT that were made by the European courts? Will they no longer be valid? It will be important to find this out. It could make a big difference to companies across the country. For some it would be a positive change, and for others a much more negative one.
As for how much VAT is charged, this will be down to the UK government to decide. It could be that rates will fall in order to encourage businesses to remain with, or come to, the UK after the Brexit happens. It could be that, since the rates have changed from 17.5% to 15% to 20% over the past few years, nothing changes for the time being until the impact on the Brexit is seen. Or rates could rise to make up for the lack of businesses working within the UK – the government will need to ensure that there is no shortfall when it comes to the money they are able to bring in.
No one know for sure how the Brexit will affect anything, including VAT. The next few years are going to be interesting.