Business: VAT

(asked on 14th December 2020) - View Source

Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what discussions his Department has had with the Bank of England on the potential effect of changes to the VAT regime on business cash flows in the final quarter of the tax year 2020-21 in the event that the UK and EU do not reach an agreement on their future relationship at the end of the transition period.


Answered by
Jesse Norman Portrait
Jesse Norman
This question was answered on 13th January 2021

As the Prime Minister set out in his Written Ministerial Statement of 3 February 2020 on the future relationship with the EU, the Government would not agree to measures in areas which go beyond those typically included in a comprehensive free trade agreement, including in the area of taxation. This is why the free trade agreement agreed with the EU will have little effect on changes to the UK tax system.

Nevertheless, the Government remains mindful of business cash flows after the end of the transition period. The Government has already announced that from 1 January 2021, UK VAT registered businesses can account for import VAT on their VAT return for goods imported from anywhere in the world. This means businesses can declare and recover import VAT on the same VAT return, rather than having to pay it upfront and recover it later.

As a matter of routine, HM Treasury continues to work closely with the Bank of England on effects stemming from the UK’s relationship with the EU.

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