Daily Tax Report: International

Brexit Delay Could Undo Stockpiling Efforts to Avoid Tax Hit

April 11, 2019, 12:42 PM

The U.K.'s six-month extension for exiting the European Union will come at a price for companies that stockpiled products to avoid a likely tax hit in the event of a “no-deal” Brexit.

Companies that import from the European Union stockpiled goods that would have been delayed at the border and hit with a value-added tax and border duties if the U.K. left the bloc without an agreement on the terms of its future trading relationship. The lack of a deal would mean the end of the free movement of goods and higher import taxes.

  • The postponement, dubbed a “flextention,” was granted at a meeting of EU leaders April 10. The U.K.’s possible exit date could be as late as Oct. 31.
  • “For many businesses, the wheels are already in motion, and this extension will mean they need to decide whether to pause and keep options open, to roll back preparations, or re-evaluate their options on a more strategic basis. It won’t always be as simple as changing the end date of plans already in place,” said Andrew Gray, PwC’s head of Brexit.
  • “Many businesses would not have had to alter their plans too much if for a short delay to April 12, but if the U.K. leaves in six months and you have good warehouse that won’t last that long you may have to sell them and this will have a cost,” said Simon Hart, RSM’s lead Brexit partner.
  • Prolonged uncertainty won’t be welcomed by businesses that have prepared extensively, said Amanda Tickel, global Brexit lead for the U.S. market at Deloitte. “Business reaction to a further extension is muted—on the plus side it removes an immediate unknown. But those that have extensively prepared, for two different dates already, are frustrated to now have a third date to work towards.”

To contact the reporter on this story: Hamza Ali in London at hali@bloombergtax.com

To contact the editors responsible for this story: Meg Shreve at mshreve@bloombergtax.com; Penny Sukhraj at psukhraj@bloombergtax.com

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