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Brexit VAT Changes – Delivery Delays, Shortages & Supply Chain Disruption

On the face of it, Brexit doesn’t seem to have caused the initial disruption that many expected. There have been no long queues at borders since the 1st January yet for example. Although news reports highlight the fact that Brexit related disruption is likely to worsen over the coming weeks. But at the current time, it seems as if the COVID-19 pandemic is having as much as, if not more of an impact on deliveries and supply chains than Brexit.

But when you delve down, news stories are already beginning to show some of the emerging impacts of Brexit which are causing delivery and supply chain disruption. One of these appears to be linked to VAT changes which were introduced following Brexit.

What changes were made to VAT rules as a result of Brexit?

VAT changes came into force from 11pm on the 31st December as a result of Brexit.

Information from HMRC states that:

Consignments of goods with a value of £135 or less that are outside:

  • the UK and sold directly to customers (not through an online marketplace) in Great Britain (England, Scotland and Wales) will have UK supply VAT charged at the point of sale
  • the UK and EU and sold directly to customers (not through an online marketplace) in Northern Ireland will have import VAT charged

This effectively means that EU (and all overseas) sellers must register for UK VAT and account for it to HMRC if the sale value is less than £135.

Why is this having a negative impact?

Increased costs and administration are creating concern to many businesses.

Given that the deal was only agreed on the 24th December and came into effect on the 1st January, many businesses have not yet had time to fully understand the new rules and what impact they may have on their business operations such as

  • Cashflow
  • Profitability
  • Administration & associated costs

These are all causing uncertainty amongst businesses and supply chains

How are supply chains being impacted?

Some EU based businesses have openly said that they will no longer be shipping to the UK as a result of these VAT changes. The most talked about seems to be Dutch Bike Bit who have stated that they will now ship to every country in the world apart from the UK. They confirm it is as a direct result of these VAT changes.

Some other businesses are following suit whilst others are reporting that they are temporarily putting deliveries to the UK on hold whilst they get a firm understanding of the new rules and the impact it will have on their business.

Obviously, this is not good news for UK consumers who may now face delays to goods already ordered or not receiving goods at all.

UK businesses may find gaps now emerge in what were well established supply chains if suppliers decide to no longer export as a result of these changes. Or find that it is no longer viable to continue to export to EU countries.

Whilst stockpiling was reported ahead of Brexit, these supply chain issues may really start to reveal themselves in the coming weeks and months.

Shipping companies are also increasing costs to account for additional admin and paperwork that is needed to continue to trade with the UK, having an additional impact on supply chains.

At Anthony Jones we remain committed to helping our customers navigate the complexities that Brexit may bring to the way business operate. If you have any questions about how Brexit may impact your insurance or your insurance needs, then do not hesitate to get in touch with our expert teams.

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