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EU announces plans for more VAT flexibility and less red tape

The European Commission is planning on giving Member States the ability to extend VAT exemptions to other EU countries, and more control of rates.

These changes are partly designed to level the playing field and encourage more cross-border trade. The Commissioner for Economic and Financial Affairs, Taxation and Customs, Pierre Moscovici, said:

“At the same time they will reduce red tape for small businesses operating across borders, helping them to grow and create jobs.”

The changes also allow Member States more flexibility when it comes to the VAT rates they set for individual products. Member States just need to ensure that the weighted average works out at 12%.

Naturally, these changes are of interest to accountants from Spital to Heswall. Any changes the EU makes to VAT rules are likely to impact their business clients. It affects how much they will pay for materials and has an impact on what their EU-based competitors will be charging. However, because of Brexit (which the Wirral did not vote in favour of) what the UK government does about VAT is clearly going to have more of an impact, so accountants are tracking those changes too.

The fact that the VAT thresholds were not changed in the last Budget was welcomed by many small business owners, but it is clear that changes are coming – an example of which is the cross-border trade bill, which means that firms importing goods from outside the UK will have to pay import VAT upfront. The VAT can be claimed back, but paying it upfront is likely to create a new cash flow challenge for many firms. This is something that UK-based accountants will have to help their clients to manage.

Posted by Mark
February 1, 2018

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