European trading difficulties after Brexit are expected by 80% of UK businesses, a study by VAT consultancy firm Accordance reported.
However, 60% of respondents do not have a strategy to combat the impact on their businesses’ VAT position after March 2019.
“It is clear from these survey results that UK businesses are aware but not prepared for the changes ahead,” said Nicholas Hallam, CEO of Accordance.
Hallam suggests that businesses need to “consider their VAT position and develop a strategic plan for the complex issues around Brexit and the difficulties of trading with Europe once we are outside the current VAT systems.”
Hallam spoke to The Global Treasurer about the implications of the study:
With many businesses operating a ‘wait and see’ approach, do you think a strategic plan is imperative to business preparation before the March 2019 deadline?
“The great danger for UK businesses is that no deal is agreed by the end of March 2019. If this happens, the default position is that the UK immediately leaves the EU: there would be no transition agreement because there would be nothing to transition to.
“At the moment, the Cabinet cannot even agree on a UK negotiating position – and the European Commission has, in any case, rejected the options they are discussing. One would hope that sense will prevail and that a transition agreement will be implemented; but ‘waiting and seeing’ assumes that it will happen.
“Given the poor performance of optimism in this matter (Cameron’s renegotiation, the referendum itself) it would be prudent – to put it mildly – to have a strategic plan in place for hard Brexit.”
What would support businesses in making a strategic plan instead of waiting until the ‘dust settles’?
“A very quick review of sales and supply chains should establish whether a business needs a strategic plan.
“If sales, production or distribution in any way depend on the EU, then the impact of hard Brexit on margins and logistics could be severe.
If the customs union is formed by Anna Soubry, to what degree do you feel this will minimize the impact on businesses?
“A customs union would make a major difference and could remove some of the immediate “hard” Brexit problems; but customs unions and partnerships come in many shapes and sizes, with different implications for different businesses, would not resolve the Single Market access issue and would not cover cross-border VAT, the treatment of which could still change fundamentally.”
Why is VAT recovery only a major concern for 9% of companies?
“In our experience, many businesses just write off VAT incurred cross-border in Europe.
“Studies have shown that billions of euros are left unclaimed every year.
“The truth is that it is difficult to make claims to different Member States if you don’t have the relevant expertise. It will only get harder for UK businesses after Brexit.”
When questioned about specific business areas that respondents were most concerned about, supply chain topped the list, closely followed by import VAT and fiscal representation.
UK Conservative MP Anna Soubry is endeavoring to do a cross-party amendment to the Trade Bill with the view of retaining a customs union with the EU.
Despite her efforts, just 38% of respondents believe that the UK will form the union.