From The Guardian:
More than 130,000 UK firms will be forced to pay VAT upfront for the first time on all goods imported from the European Union after Brexit, under controversial legislation to be considered by MPs on Monday.
The VAT changes spelled out in the taxation (cross-border trade) bill – one of a string of Brexit laws passing through parliament – are causing uproar among UK business groups, which say that they will create acute cashflow problems and huge additional bureaucracy.
Labour and Tory MPs and peers said that the only way to avoid the VAT Brexit penalty would be to stay in the customs union or negotiate to remain in the EU-VAT area...
This is a typical spat between incompetent government and hard-core Bremoaners, with long-suffering UK businesses caught in the crossfire.
VAT is the most damaging tax, but all the same, it can be made administratively as painless as possible. Before wading in, it is important to know how it currently works on a day-to-day level. When a UK VAT-able business imports from the EU, VAT is nominally due, but it is not paid up-front - what happens is that the notional import VAT is added to the total VAT payable on the next VAT-return, but the importer can also reclaim the notional import VAT is input tax, so the overall payment is nothing.
This defers the business' cash outflow by a few weeks or months - the apparent proposed new system is to collect VAT at point/time of import (a massive administrative burden) and not to credit it as input VAT until the next return (usually quarterly).
There is nothing to stop the UK government from continuing current practice post-Brexit (in fact, we could do this for most import duties). And despite what 'Labour and Tory MPs' have said, there is absolutely no need for the UK to remain in the Customs Union or the Eu-VAT area to be able to do this - remember that post-Brexit, it is entirely up to the UK government whether or not it imposes import duties, import VAT or even VAT at all.
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