UK firms ‘face £34bn VAT bill for transporting goods across EU countries

British companies will face £34bn in tax costs for transporting goods around Europe after the transition period ends, according to VAT experts.

A view of EU flags outside The Berlaymont building, the Headquarters of the European Commission in Brussels. VAT IT said thousands of UK businesses are "unprepared" to deal with VAT laws in countries across Europe once the country exits the EU next month. Picture: Aaron Chown/PA Wire

UK-based VAT IT said thousands of UK businesses are “unprepared” to deal with VAT laws in countries across Europe once the country exits the EU next month.

Selwyn Stein, managing director of the tax reclamation specialists, said that firms exporting across Europe will face hefty unexpected VAT bills even if a last-minute trade deal is secured.

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VAT IT, which has around 13,000 clients globally, said it has recently reclaimed around £250m in taxes for companies outside the EU dealing with the 27-nation group.

It said that demand for tax advice has soared in recent months as companies scramble to be prepared for January 1.

“A couple of months ago we were getting 50 calls a week and that’s risen to at least 150 now,” Mr Stein said.

“And we are urging more companies to get in touch because it’s clear this is something a lot of business just aren’t prepared for.

“It’s not just a small business issue either. We’ve had big FTSE companies getting in touch recently because they didn’t realise how complicated this can be.”

Mr Stein said UK companies will have to deal with different VAT rules in each EU country once it exits the trade bloc, with costs ranging from 20 per cent to 27 per cent.

The company said this will add up to an estimated £34bn and many companies are unaware that this VAT bill can be reclaimed by firms.

“We are looking ahead to 270 million customs declarations and maybe British firms find this paperwork complicated in English, let alone when they are handed the Spanish or French copy,” Mr Stein added.

“I don’t believe British firms, as a whole, are entirely aware, and I think that is why are seeing more businesses coming to us now.

“Covid means some companies have been slow to react to this but it is important small companies are aware of the tax implications.”

It comes as UK importers are reported to be struggling with congestion problems at Felixstowe and Southampton and there are fears of major delays at Dover from the new year.

Last week Shadow Cabinet Office minister Ms Reeves questioned the sums allocated by the Government to the UK’s ports in the Port Infrastructure Fund.

She told the Commons on Thursday: “Yesterday the Port Infrastructure Fund was finally announced. We found out that Dover didn’t get the £33m that they had asked for, but instead they got just £33,000. Portsmouth faces a shortfall of £8m.

“Now, the minister recently visited that port so he knows its huge importance. So why has the Government short-changed vital infrastructure critical to the everyday economy whilst at the same time wasting millions of pounds on consultants and middle-men as part of Tory cronyism?”

Mr Gove replied: “The port infrastructure team had an independent team to look at the eligibility of all of the ports that applied and to assess all of the bids and they were done on the most rigorous of basis.”

Ms Reeves said Mr Gove “needs to give greater assurances that there will not be those delays and disruptions that we all fear” at ports in the UK.

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