Whatever your thoughts on the UK leaving the EU, the move has brought with it a significant amount of change and irreversibly altered the way in which businesses trade with Europe.
If your business relies upon imports from European countries or exports regularly to them then you will have encountered first-hand the breadth and depth of the changes which have come into play since the end of the transition period.
You will have no doubt had moments when you’ve been pulling your hair out trying to get your head around the new processes, procedures and requirements.
It’s been a long journey and we sympathise with those of you who have grappled to keep your customs processes running smoothly.
But as with all things new, whilst initially they bring challenges, there is always scope for new opportunities too and one very positive outcome of Brexit and all the new systems is the introduction of the postponed VAT accounting system.
The reason – cashflow.
Since January 1, 2021, businesses registered for VAT that import goods into the UK from Europe have been able to use the postponed VAT accounting system. And, even when further customs changes were brought in at the start of this year, this was one element which remained unchanged in an effort to support UK businesses.
In a nutshell, what it means is that businesses do not have to physically pay import VAT on goods and then go through the process of reclaiming it on their subsequent VAT return later down the line.
Instead, the VAT is accounted for as an input and output VAT on the same return meaning that businesses do not have to make a physical payment and can utilise money in the bank for other day-to-day running costs.
The purpose has been to help alleviate any cashflow issues for businesses that import and also to prevent goods being held at ports for any length of time.
It must be said that from our perspective the system of postponed VAT accounting is an absolute no-brainer for businesses which are importing from Europe.
This is particularly so for smaller companies or start-ups where cash-flow can often be a real issue and impact on success in the early days.
And, in the current post-pandemic climate when businesses are facing rising fuel prices, energy costs and inflation increases, anything that contributes to better cashflow must be a good thing.
It’s a system that we have advised many of our own customers to take advantage of and if it’s something you need more information on, our team of experts will be happy to advise. You can email us on email@example.com or ring 01952 270699.