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Irish businesses urge Taoiseach for longer VAT deferral on UK imports post-Brexit

Journal.ie logo Journal.ie 12/02/2019 Adam Daly

Lorries arrive at the Port of Dover in Kent © PA Wire PA Images Lorries arrive at the Port of Dover in Kent BUSINESS GROUP LEADERS have written to the Taoiseach calling on the Government to put in place a three-month deferred accounting of import VAT scheme to help companies avoid cash-flow pressures. 

The Irish Exporters Association, in association with Ibec, Isme, Chambers Ireland and the Irish Tax Institute published a joint letter they sent to Leo Varadkar to highlight that the  Government has not yet addressed the issue of a VAT deferral scheme.

“Although such a scheme is necessary even in an agreed Brexit scenario, the urgency is heightened by the growing threat in the event of a no-deal Brexit,” it said. 

The association has asked for this measure to be “urgently” included in the Brexit Omnibus Bill currently under consideration.

Irish Prime Minister (Taioseach) Leo Varadkar (L) poses with European Commission President Jean-Claude Juncker at the European Commission headquarters in Brussels on February 6, 2019. - Speaking in Northern Ireland on February 5, British Prime Minister Theresa May promised to seek a solution that keeps the Irish border open and preserves the peace agreement that ended years of sectarian violence in the British province, ahead of her trip to Brussels on February 7 to meet with EU leaders, as the two sides seek to save their Brexit deal. (Photo by Aris Oikonomou / AFP)        (Photo credit should read ARIS OIKONOMOU/AFP/Getty Images) © Catalyst Images Irish Prime Minister (Taioseach) Leo Varadkar (L) poses with European Commission President Jean-Claude Juncker at the European Commission headquarters in Brussels on February 6, 2019. - Speaking in Northern Ireland on February 5, British Prime Minister Theresa May promised to seek a solution that keeps the Irish border open and preserves the peace agreement that ended years of sectarian violence in the British province, ahead of her trip to Brussels on February 7 to meet with EU leaders, as the two sides seek to save their Brexit deal. (Photo by Aris Oikonomou / AFP) (Photo credit should read ARIS OIKONOMOU/AFP/Getty Images)

According to business groups, if the UK  leaves the EU in March and becomes a ‘third country’, under the current VAT regime businesses in Ireland will immediately face the prospect of paying VAT on all UK imports at the point of entry, while waiting up to three months to reclaim the money.

“This is a significant issue which will put acute pressure on companies’ cash flows at a time when it can least be afforded,” the letter states. 

Over half of Irish importers source 75% or more of their imports from the UK.

The association has said that feedback it’s received from members indicates that the implementation of this VAT regime in a post-Brexit scenario will lead to the closure of many UK-reliant manufacturers, importers and SMEs.

BRUSSELS, BELGIUM - FEBRUARY 06, 2019: 14th Taoiseach Leo Varadkar (L) is welcome by the President of the European Council Donald Franciszek Tusk (R) prior a bilateral meeting in the Europa, the EU Council headquarter on February 6, 2019 in Brussels, Belgium. Irish Taoiseach (Prime Minister) Leo Varadkar is meeting President of the European Council Donald Tusk to talk about the border that separates Northern Ireland and the Republic of Ireland in the Brexit agreement. (Photo by Thierry Monasse/Getty Images) © Catalyst Images BRUSSELS, BELGIUM - FEBRUARY 06, 2019: 14th Taoiseach Leo Varadkar (L) is welcome by the President of the European Council Donald Franciszek Tusk (R) prior a bilateral meeting in the Europa, the EU Council headquarter on February 6, 2019 in Brussels, Belgium. Irish Taoiseach (Prime Minister) Leo Varadkar is meeting President of the European Council Donald Tusk to talk about the border that separates Northern Ireland and the Republic of Ireland in the Brexit agreement. (Photo by Thierry Monasse/Getty Images)

 Based on existing trading volumes, the total additional cashflow need for SMEs would be more than €1 billion per annum. This alone is enough to close many manufacturing, retail, and wholesale companies, while for many other companies it will severely limit their capacity to grow and invest. We are also concerned that it will be challenging for lending institutions to process applications within the time available, even if they have the credit appetite or capacity.

The group’s letter concluded by saying Ireland must follow Britain’s suit by committing to the introduction of a VAT deferral regime from March. 

“We believe that introducing a deferral regime of three months for VAT would significantly ease the cash flow pressures facing Irish firms.”

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