Brexit saga boils over as HMRC issues VAT ‘no deal’ warning to 145,000 firms

The Brexit saga has boiled over into crisis, with Theresa May clinging onto her party leadership after furious Conservative MPs tried to bring her down, such was their dismay over her deal with the EU.

In fact, MPs from across the political spectrum have been leaping forth to proclaim their outrage over the withdrawal agreement, which was struck after nearly two years of painstakingly drawn out negotiations. Opposition to the plan is so fervent across the House of Commons that the embattled Prime Minister was forced to defer the Parliamentary vote on ratifying the deal, knowing she was certain to lose. She hopes, meanwhile, to win concessions from the EU to convince MPs to approve it in January, though there has been little to suggest she has reason to be encouraged about the chances of this occurring.

Important HMRC update

Amid all the chaos at Westminster, you may have missed an important announcement from HMRC and the Government that has snuck somewhat under the radar. A letter has been published to help businesses that trade with the EU get ready to deal with customs in the “unlikely event that the UK leaves the EU without a deal on 29 March 2019”.

Looking at the latest developments in Parliament, that possibility of no deal has ostensibly increased, depending on which politician or commentator you listen to.

We’re left at a point where any eventuality still seems possible right now. The statute books, the law, says the UK will leave the EU on 29 March 2019. But will it? With no majority in the House of Commons for any of the possible alternatives to Theresa May’s deal – except for opposition to ‘no deal’ – what will happen next?

Backstop causes deadlock

The most controversial point causing the current deadlock in the Commons is the so called ‘backstop’ – designed to be an insurance policy against a hard border returning to Northern Ireland. It could take effect if the EU and UK fail to agree a new trading arrangement before the end of the transition period.

The EU insists the withdrawal agreement as a whole is non-negotiable now and that a backstop is essential for any deal. Yet, British MPs are appalled that it renders the UK unable to leave of its own volition and only with the EU’s permission – as the deal stands. At the time of writing, it’s hard to see how both sides will get past this critical plank of the agreement.

So, based on this, it’s perhaps even more important to look at what the letter from Jim Harra, Deputy Chief Executive of HMRC, states about preparation for a no deal scenario.

What is HMRC telling businesses?

Sent to 145,000 businesses that only trade in the EU and are registered with HMRC for VAT purposes, the letter asks these firms to take three actions now:

1. Register for a UK Economic Operator Registration and Identification (EORI) number via www.gov.uk/hmrc/get-eori. An EORI number is needed:

- If you want to continue to import or export goods with the EU after 29 March 2019, if the UK leaves the EU without a deal

- Before you can apply for authorisations that will make customs processes easier for you

2. Decide if you want to hire an agent to make import and/or export declarations for you or if you want to make these declarations yourself (by buying software that interacts with HMRC’s systems). You must do this if you want to:

- Declare through an agent, contact one to find out what information they’ll need from you

- Use software to make declarations yourself

3.Contact the organisation that moves your goods (for example, a haulage firm) to find out if you will need to supply additional information to them so that they can make the safety and security declarations for your goods, or whether you will need to submit these declarations yourself.

What happens next?

The Government says it will write to businesses again to let them know what further actions they will need to take and when.

That will depend very much on what happens next. At the time of writing it, we are still at an impasse, with no obvious way ahead that can win the support of the whole of the House of Commons.

The current crisis could yet lead to a whole range of dramatic outcomes and very soon, including the collapse of the Government, a General Election or even a second referendum.

It’s likely that ‘no deal’ preparations are going to ramp up – just in case. So, we should all keep a close eye on more announcements to come.