VAT snafu once again highlights Government's Brexit negligence

More than 100,000 businesses could face cash flow crises from the UK pulling out of the EU customs union because VAT will be levied upfront on EU goods

The port of Felixstowe: Firms face paying VAT upfront on goods imported into the UK after Brexit (Getty Images)

Bureaucratic headaches and VAT go together like the tea and sympathy most of the finance people having to deal with the levy feel probably they need after a hard week at it.

I imagine quite a few might have, at first, simply shrugged wearily and sighed ‘plus ca change’ at the news Brexit is going to greatly add to them, at least, that is, until they had spent some time considering the implications of the latest googly from the Government.

It has the potential to kill off a lot of their employers.

For those who may have missed the reporting, the potential VAT crisis is is being created by the Government’s hardline approach to Brexit.

Because Theresa May & co intend to take the UK out of the single market, and out of the customs union too, goods imported from Europe by well over 100,000 UK companies are set to incur VAT upfront when they enter the country rather than after they are sold, as is currently the case.

This will inevitably create horrible bureaucratic problems, adding to those being created by the UK coming out of the world’s biggest single market.

The bigger issue, however, is that it will also create cash flow problems for affected firms such as, for example, retailers that have to wait until goods are sold to claim the VAT back.

Lots of them are already struggling - see my earlier comment today for details of the latest. This could be the straw that breaks the camel’s back for at least some of them. Short term cash flow problems can kill off businesses just as easily as sustained periods of loss making, particularly in the case of smaller outfits that can’t call upon investors or lenders for help when things get sticky in the way that large stock market listed business can.

Now, it’s not impossible to see the issue being sorted out. Brexiteers like Boris Johnson, David Davis and Michael Gove, not to mention all their little mini mes, keep on saying the UK’s transition out of the EU will ultimately be good for business and the economy.

For them to retain any of their dwindling reserves of credibility on that front the issue surely needs to be addressed. Amendments have been tabled in the House of Commons to that end. It’s possible that a compromise may ultimately emerge, if not through them, then thanks to the House of Lords.

Even if that happens, however, what this issue once again highlights is the complete lack of thought that been applied to the process, the way an issue of historic import is being conducted on the fly.

Consider that at the end of last week this issue hadn’t even emerged. No one was talking about VAT at all. It has gone from non issue to fully fledged crisis within the space of a day or so simply as a result of people saying, wait a minute, does that really mean… oh Christ.

Even if this bugbear ultimately gets put to rest, there will inevitably be more like it emerging over the months ahead, and there is a very real danger that some will be recognised too late.

Wherever you stand on the UK’s position vis a vis Europe, this Government’s negligent conduct of the issue frankly borders on the criminal.

Were almost any other agency to proceed in this fashion it might well actually be considered as criminal. The consequences for those behind it would almost certainly be more severe than the potential loss of a Parliamentary seat and the jaundiced verdict of history.