Self-employed sole traders and small businesses currently struggling with their tax returns as the self-assessment deadline looms could be in for a nasty VAT shock if Parliament backs the Brexit deal next month, campaigners have warned.
Under the deal Britain will lose its current veto on VAT exemption thresholds and that would mean small businesses in the UK could, in coming years, be forced for the first time to charge VAT. Currently the UK’s exemption is set at £85,000 but the loss of our national voting and veto powers could see this lowered to around £76,000, potentially forcing hundreds of thousands of self-employed traders to slap VAT on their products and services.
The VAT bombshell was included in a House of Commons report slipped out on Christmas Eve.
The House of Commons’ EU Scrutiny Committee stated:
“the Government would be under a legal requirement to lower the VAT registration threshold for SMEs by nearly £10,000, as the UK limit is currently above the upper threshold of £76,700 proposed by the European Commission (and to which, so far, the remaining Member States have not objected). Any new EU legislation would, for the duration of the transition, override the UK’s discretion to legislate in breach of the Directive.”
In Northern Ireland the “backstop” rules mean that the VAT rise could be permanent, as the backstop takes away the UK Parliament’s ability to set VAT rates and rules in Northern Ireland.
Commenting Chris Leslie MP, former Shadow Chancellor and leading supporter of the People’s Vote campaign, said:
“Nobody put ‘Pay More Tax’ on the side of their bus in the referendum campaign. This is another thing that none of us could possibly have known about back in 2016 and whatever way you voted then you weren’t voting for more taxes and bureaucracy on small business and the self-employed.
“The Prime Minister’s plan makes the UK a rule-taker and removes our say round the table.
“Brexit campaigners promised we would continue to enjoy ‘the exact same benefits’ of being in the EU, while ‘taking back control’. But this deal shows these promises will be broken – not because the Government won’t keep them - but because they can’t be kept; no one can keep promises that are contradictory. Instead, this proposed Brexit deal delivers the exact opposite of what was promised: the UK would lose all its rights as an EU member – with less trade, fewer opportunities and lower living standards – while suffering the biggest loss of sovereignty and control in British history.
“The real choice now is whether to go ahead with a Brexit deal or stick with the deal we already have as members of the EU. Now we know what Brexit looks like, the public should be given the opportunity to decide in a People’s Vote – is this the kind of deal we want, or is the deal we already have in the EU better? In the end, only the people can sort this out.”
Notes to editors:
The lowering of the VAT exemption threshold would be a consequence of a proposed amendment to the EU’s VAT rules. The amendment is expected to take effect before December 2022 (which is the last date in which the UK can be in the EU ‘transition’ period). If the UK has not agreed a treaty on the future relationship with the EU by the end of the transition the Irish “backstop” will apply. Even if a treaty is agreed then it is likely to see much of the EU’s VAT regime permanently embedded into UK domestic law.