- 23rd March 2018
- Posted by: Suzy Hill
- Category: HMRC News
Two thirds of UK businesses lack post-Brexit VAT strategy
Businesses are failing to prepare for the impact exit from the EU will have on their tax affairs, according to research by BDO which found that 65% of UK companies lack a formal VAT strategy, leaving many looking for professional help in determining the best approach going forward
The firm’s poll of some 900 businesses across nine countries also revealed that 38% of UK respondents say their VAT strategy is only somewhat effective or not effective at all.
While Brexit negotiations remain unclear, 40% of businesses state it is very likely that they will need to take additional VAT advice to assist in managing Brexit.
Tom Kivlehan, BDO partner, said: ‘Brexit is not an event to be taken lightly, as it’s likely to affect businesses from start-ups right up to conglomerates across global jurisdictions. Brexit will inevitably bring a variety of challenges, however it can be difficult for firms to ascertain how exactly the current parameters will change and how they will be affected.
‘What we do know is that VAT and customs duty are closely linked to our relationship with the EU and they will be at the front line of changes affecting businesses when Brexit takes place. Our exit is also expected to bring an additional cash flow burden for those buying and selling goods with EU counterparts. Cross border traders should start preparing now to mitigate the impact of this and other forthcoming VAT changes.’
The research also cast doubt on efforts by the UK authorities to challenge and influence taxpayers’ behaviour via a behaviour-based penalty regime. It showed that 58% of businesses say that this has not influenced their approach to their VAT strategy.
In addition, despite these penalties, 15% of respondents state that their tax return is prepared by a staff member with no VAT/tax qualification or expertise and is then submitted to HMRC with no review.
Kivlehan said: ‘It appears that only those UK businesses which have had significant VAT errors in the past are dedicating appropriate resources towards managing its VAT compliance effectively.
‘The lack of tax strategy across business of all sizes suggests that Brexit may be a catalyst for businesses to put a strategy in place.
‘As formal Brexit negotiations continue, it would be advisable for businesses to start scenario planning and consider their options. Those that prepare now will be able to adapt more quickly to the new trading environment as it evolves.’
Contact us if you need VAT advice