In the event that the UK leaves the EU with no withdrawal agreement in place on 29 March 2019, goods arriving from other EU member states will be treated as imports from this date. The effect of this is that customs duty and import VAT will be payable in order to release the goods into free circulation in the UK. Import VAT is recoverable for fully taxable businesses, however recovery is not effected until the periodic VAT return is filed, representing a potentially significant cash-flow issue for regular or high value importers.
To ease this issue, the UK government has previously announced that an import VAT deferral system will be implemented meaning that payment of import VAT can be deferred until submission of the periodic VAT return, meaning VAT is paid and recovered simultaneously.
The statutory instrument for this implementation has now been issued, and confirms that the deferral will be available to UK VAT registered businesses. There appears to be no requirement for the importing business to have an establishment within the UK. The instrument also confirms that HMRC have the power to refuse use of the deferral should they deem it necessary for the protection of the revenue.
Should a withdrawal agreement be reached prior to the UK leaving the EU, goods arriving from the EU would not be treated as imports until the end of the transition period which would end in December 2020.