At the time this article was initially drafted the UK were expected to have exited the EU. This was then extended to the 12th of April if no deal was agreed or the 22nd of May if a deal could be achieved. In the meantime, Theresa May offered up her resignation, has withstood a party coup and has seen quite a number of indicative votes being lost in parliament. The current talk is that they will request a further, longer extension which would give them time to go to the people and ask for them to vote on the current leave option being proposed by Theresa May. The alternative is a hard Brexit. By the time you are reading this there will undoubtedly by more updates, but I guess the actual position of the British still won’t be any clearer.
There are many issues facing businesses resulting from a hard Brexit and one of those is taxation. The way the legislation is written means that most reliefs and rules relate to Ireland and countries within the EU. By mid-May we can unfortunately assume that the UK will be outside the EU and therefore as the legislation is currently written the tax legislation would make it extremely difficult to do business with the UK.
Last month the government published draft legislation in an attempt to mitigate the effects of a “no deal Brexit”. This bill aims to deal with important items that will be greatly affected by a sudden hard exit of the United Kingdom from the EU. The Bill, which will be fast-tracked through the Oireachtas, is designed to support businesses and jobs impacted by a no-deal and secure ongoing access to essential services and products across the Irish border. The proposed legislation will only become law if the UK leaves on April 12th (or whenever!) without a deal. The bill provides for the modification of Income Tax, Capital Tax, VAT, Corporation Tax and Stamp Duty legislation in order to ensure continuity for businesses with regard to their ability to access certain taxation measures such as reliefs and allowances. In order to maintain this continuity the bill allows for relevant legal conditions that are currently only applicable to EU countries to apply to the UK post Brexit.
One of the key provisions in the bill is the proposal to allow Irish companies importing goods from the UK to delay the payment of the import VAT. Currently when an Irish business imports goods into Ireland from a non -EU country then they must pay VAT on import. This creates a substantial cash flow burden on the Irish business. This cash flow burden will be intensified if they now need to pay VAT on import on UK goods coming in. The proposed new rules will mean the importer does not pay VAT on import but instead pays over the VAT in their next VAT return. This would apply to all non-EU countries and not just the UK.
This scheme will be provided to all traders for an indefinite period post a “no deal Brexit”, however the Minister of Finance has confirmed that continued qualification for this scheme will be dependent on receiving Revenue authorisation at later date.
Another key provision of the Withdrawal Bill is changing of the conditions necessary to qualify for the VAT 56 Authorisation scheme (this is the old 13b exemption number). Section 56 of the Value-Added Tax Consolidation Act 2010 allows qualifying businesses to receive certain goods and services from Irish suppliers with a zero-rate of VAT applying as well as importing goods free from VAT. Broadly speaking you qualify for this scheme if over 75% of your turnover is received from non-EU countries. Currently qualification for this scheme is based upon projected turnover figures for the coming 12 months. The bill proposes to change qualification to being based on the turnover figures of the prior 12 months. As a result of this, businesses will now have to wait at least 12 months before applying for authorisation. The bill also proposes that the holder of the VAT 56 authorisation must be compliant across all tax heads during the period to which the authorisations pertains to. Revenue are also free to remove this authorisation should they feel that the requirements are no longer being met. By having this authorisation companies who have the majority of their sales with the UK will not have to pay VAT on most of the services/goods they receive in Ireland.
One of the ways in which businesses can prepare themselves for a “no deal Brexit” is by applying for an Economic Operators Registration and Identification (EORI) number. The number which took effect in 2009 serves as a common reference number for any businesses interaction with the Customs Authorities of any Member State. It is an essential requirement for any business planning to import or export goods with countries outside the EU. Applying for this number is free and will save a lot of hassle should the UK leave the customs union. Revenue have said that 2,617 registrations have been made so far this year, compared with a total of 2,976 for all of 2018. A basic step of any businesses Brexit preparations should be obtaining an EROI number as well as ensuring they have the facility to make a customs declaration. Registration can be completed quickly and easily through Revenue's secure online services
From experience I would guess that there are going to be many tax related items that haven’t been accounted for or even thought about by the Government. This is going to be trial by error in many respects and the only guarantee is that it won’t run smoothly. I would encourage speaking with your advisors regularly on this topic once the UK leaves, as tax treatments of even the simplest transactions with the UK will most likely change on a regular basis.
