Brexit happened almost four years ago: Here’s what’s changed in terms of tax

With nearly four years since the UK’s departure from the European Union on 31 January 2020, some significant changes have happened in international business, particularly regarding tax regulations.

These changes could have impacted your business already, or, if you are an entrepreneur looking to expand your business overseas, might have significant consequences for you in the future.

Here are some of the changes that we have seen in the last four years:

VAT changes and challenges

One of the most immediate impacts of Brexit on entrepreneurs was the alteration in VAT regulations.

Before Brexit, businesses engaged in trade with EU member states benefited from the simplicity of intra-EU transactions, often requiring minimal customs paperwork and without VAT implications.

However, post-Brexit, UK businesses are now treated as third-country entities when trading with the EU.

This change means that VAT applies to imports and exports to most European countries, presenting new challenges for entrepreneurs, such as increased administrative requirements and potential cash flow implications.

For businesses operating in Northern Ireland, the situation is more complex due to the Northern Ireland Protocol, designed to avoid a hard border on the island of Ireland.

Northern Ireland continues to follow EU VAT rules for goods, creating a scenario where some businesses must navigate both UK and EU VAT systems simultaneously.

Strategic adjustments to streamline your VAT liabilities

UK entrepreneurs with significant trade in the EU might find it beneficial to consider VAT registration in EU member states where they conduct business.

This can streamline VAT compliance and reduce complications in cross-border trade.

The UK has introduced postponed accounting for VAT on imports, allowing entrepreneurs to account for and recover VAT on their VAT return, rather than paying VAT upfront at the point of entry.

This scheme helps with cash flow management and offers more liquidity in harsh economic conditions.

Additionally, business owners should evaluate their supply chains and distribution networks, looking for ways to minimise customs delays and reduce transportation costs.

Shifting suppliers or using bonded warehouses could be viable solutions to increased tax liabilities.

Final thoughts

Understanding the implications of EU taxes and VAT after Brexit is crucial for businesses aiming to thrive in this changing regulatory landscape.

Seeking advice from experienced international tax advisers is recommended to help entrepreneurs make informed decisions and remain compliant with tax regulations.

By implementing sound strategies and seeking expert guidance, UK entrepreneurs can adapt to the new landscape, manage their tax obligations, and continue to grow their businesses successfully in the post-Brexit era.

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