Brexit VAT issue. What effect on Island?

[Barrie Stevens]

https://www.theguardian.com/politics/2018/jul/18/business-leaders-attack-pms-surrender-to-rees-mogg-on-vat

Anyone got ideas as to how the Brexit VAT issue may impact on Island finances if any etc?

[woolley]

That's crackers. First they have conflated two discrete issues into one. The Irish border smuggling situation is a legitimate concern that needs addressing although it is difficult to imagine the VAT rates diverging a great deal north and south of the border. However, VAT is a domestic (EU) tax on consumption. If the UK is outside the EU as a third country, imports and exports from and to the EU will not carry VAT at all, unless that is agreed as part of a negotiation which would be odd, and not really Brexit. They might carry other reciprocal tariffs, but again that would be subject to whatever agreement is reached, and it is unlikely there will be any. They say that businesses may be obliged to pay VAT months early, but they don't explain in what scenario this would be the case. Any anomalies could be ironed out by HMRC in any case. For instance, they could simply allow businesses to declare UK VAT on imported goods at the time of importation against their outputs for the current quarter, very much in the same way as the EC Sales Declaration works at present. The effect of that is neutral.

The Island is in a customs union with the UK so that will not change. Island businesses exporting goods to the EU will be in the same position as those in the UK.