No one can predict what will happen to the VAT rules, and rates, following the referendum on 23rd June. All we can say with certainty is that a vote to leave will have a huge impact on VAT regulations.
VAT is regulated by the EU and the UK government is bound to abide by the regulations and judgements handed down by the European Court of Justice. This dictates what goods and services we must charge or exempt from VAT. It also sets the parameters for the reduced rate of VAT that is applied to certain qualifying supplies, which currently includes domestic heating, electricity and sanitary products.
An exit from the EU would free the UK government to charge more, or less, VAT as they please and redefine those goods and services that would be subjected to the tax. If the vote is to remain within the EU VAT would still be subject to the rules and regulations as currently applied, but the government would still retain the ability to amend the rates, within parameters, to deal with the fallout that is bound to occur.
Whichever way the vote goes, the probability of VAT changes are highly likely. This is already a complex tax and any amendments to the current legislation are sure to cause initial confusion and will require considered judgement as to their consequences and application.
If you’re affected by the post referendum VAT changes and would like advice and guidance relating to your business please don’t hesitate to contact our VAT advisors for assistance.