Brexit VAT change threat­ens com­pa­nies

Busi­nesses in South face two-month wait to re­claim VAT on im­ports from UK Ibec says that this will pres­surise com­pa­nies’ cash flows

The Irish Times - Business - - BUSINESS THIS WEEK - BARRY O’HAL­LO­RAN

A post-Brexit VAT change threat­ens to close thou­sands of com­pa­nies by squeez­ing their cash flows, the Re­pub­lic’s big­gest em­ploy­ers’ group fears.

The UK’s exit from the EU in March will put the coun­try out­side the bloc’s cur­rent VAT regime, which al­lows busi­nesses to im­me­di­ately re­claim the charge on goods bought from Bri­tain and North­ern Ire­land.

How­ever, once the UK leaves the EU in March, busi­nesses in the Re­pub­lic face the prospect of pay­ing the VAT on goods im­ported from the UK at the point of en­try while wait­ing up two months to re­claim the money.

Busi­ness body Ibec says that this will pres­surise com­pa­nies’ cash flows and could be par­tic­u­larly dam­ag­ing for smaller busi­nesses, many of which have not en­coun­tered the prob­lem be­fore.

Vul­ner­a­ble

Ger­ard Brady, se­nior econ­o­mist with Ibec, pointed out yes­ter­day that 40 per cent of con­sumers goods bought in the Re­pub­lic come via the UK, leav­ing large num­bers of busi­nesses vul­ner­a­ble. “Most small and medium-sized en­ter­prises have not dealt with this be­fore and do not have the cash flows to cope,” he said. “You could be look­ing at clo­sures.”

Mr Brady ex­plained that busi­nesses now get im­me­di­ate credit for VAT on goods from the UK and do not have to wait up to two months to get the money back.

He noted that the charge could be up to 2 per cent of turnover for busi­nesses that im­port just 10 per cent of what they sell from the UK and warned this would cre­ate dif­fi­cul­ties for those op­er­at­ing on nar­row mar­gins.

Busi­nesses echoed Mr Brady’s con­cern. Ian Mar­tin, chief ex­ec­u­tive of first aid and hy­giene prod­ucts dis­trib­u­tor Mar­tin Ser­vices, said he would pay 23 per cent VAT on some goods. “Which in turn means I face big prob­lems with cash flow,” he added.

Su­san Dempsey, di­rec­tor and co-founder of Sweetspot Sourc­ing, which sup­plies gifts used in mar­ket­ing cam­paigns, also pre­dicted the change would cre­ate dif­fi­cul­ties for the firm’s cash flow.

Ibec has asked the Gov­ern­ment sev­eral times to change the rules to al­low busi­nesses to ef­fec­tively re­claim VAT on UK goods after Brexit.

Mr Brady said that the group sought what he called a “sim­ple change” in the bud­get and

‘‘ Ibec has asked the Gov­ern­ment sev­eral times to change the rules

pointed out that the Nether­lands and Poland have al­ready taken this step.

The Rev­enue Com­mis­sion­ers said that VAT and cus­toms duty are paid at the point of en­try on goods from non-EU coun­tries, but is not payable un­til the 15th of the month fol­low­ing im­por­ta­tion. Busi­nesses can re­claim the money un­der the nor­mal VAT rules.

PHO­TO­GRAPH: MARY TURNER/BLOOMBERG

A ‘No Bor­der, No Brexit’ ■ sticker on a road sign near the ‘Hands Across The Di­vide’ sculp­ture in Derry.

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