Small Businesses: VAT

(asked on 5th January 2022) - View Source

Question to the HM Treasury:

To ask Her Majesty's Government what assessment they have made of the (1) cashflow difficulties, and (2) compliance costs, faced by (a) small, and (b) medium, sized UK businesses from recent changes to the VAT regime when trading with EU countries.

Answered by
Lord Agnew of Oulton
This question was answered on 18th January 2022

Following the end of the transition period, sales from UK businesses to the EU are exports and are zero-rated for VAT purposes. This means that the UK business seller should not charge UK VAT on the sale and should retain evidence of export.

How goods sent to the EU are treated upon import into the EU is a matter for the EU. On 1 July 2021, the EU removed low value consignment relief for VAT on imported goods not exceeding €22 and introduced a new optional simplification scheme for the collection and payment of VAT on goods not exceeding €150, known as the Import One Stop Shop.

The UK does not provide an impact assessment of policy measures that are introduced outside of the UK by jurisdictions.

Nonetheless, the Government appreciates that small and medium sized businesses (SMEs) are more likely to find the changes to trading with the EU challenging. In response, following the end of the transition period, the Government introduced the SME Brexit Support Fund, which closed to new applications on 30 June 2021. The Recovery Loan Scheme has continued to provide support since then. This helps businesses of any size access loans and other kinds of finance so they can recover after the pandemic and the transition period. Loans are available through a network of accredited lenders which are listed on the British Business Bank's website.

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