When goods are imported from a non-EU country into the UK, the default position is that import VAT is paid at the appropriate rate and claimed by the importing business in a subsequent VAT return in accordance with the usual rules. This causes a cashflow disadvantage for the importer and, although there are some ways to address this issue, they can be cumbersome and expensive.
The EU removed the concept of importation and import VAT in relation to goods moving between EU member states, significantly simplifying the procedure. What was import VAT became Acquisition VAT and, rather than being paid at importation and months recovered later, businesses recorded the liability on the same VAT return as it was claimed.
When the UK leaves the EU, unless there is an agreement to the contrary, all goods arriving in the UK from the EU will again become imports and businesses bringing goods into the UK will suffer the cashflow disadvantage caused by the import process.
The government has recognised this in the Autumn Budget 2017, though there are no details or even promises of a solution. The government simply states that it will take this into account when considering potential changes following EU exit and will look at options to mitigate any cashflow impacts for businesses.
Businesses which bring goods into the UK from other EU member states should continue to observe the government’s announcements regarding post-Brexit rules on importation.