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The next phase of Brexit – EU new Green Tax and VAT changes

Recent data from the British Chambers of Commerce (BCC) brings to light a lack of readiness amongst UK’s small and medium-sized enterprises (SMEs) concerning evolving EU rules and tax alterations.

Astonishingly, 80% of the surveyed SMEs are not familiar with their reporting obligations in accordance with the EU’s newly instituted Green Tax, which came into effect on 1 October 2023.

Referred to as the ‘carbon border adjustment mechanism’ (CBAM), this tax mandates that businesses disclose carbon emissions associated with specified imported commodities, including steel, aluminium, and fertilisers.

Beginning in 2026, enterprises will be obliged to buy certificates to counterbalance the emissions associated with these products.

The VAT conundrum

Another significant shift is in the EU’s value-added tax (VAT) system, slated for implementation in January 2025.

The new VAT regulations will mean businesses need to pay VAT in the country where the customer resides – even if the service or product is delivered digitally.

For instance, if your business provides online personal finance workshops, then you will need to pay VAT in the customer’s country from January 2025.

Product quality marks

The survey also found that 43% of UK manufacturers were unaware of the potential for a new UK product quality mark – that aims to supersede that of the EU.

This knowledge gap could potentially lead to additional obstacles for UK exporters, particularly for paperwork and licencing.

In light of these forthcoming shifts, businesses must scrutinise their EU import activities and evaluate the compliance and organisational repercussions on their commercial transactions.

Brexit has undeniably resulted in a mismatch between UK and EU tax and export regulations.

It is therefore crucial to remain well-informed and proactively prepare to cushion your business against the impact of increased tax liabilities.

Governmental initiatives

The Department for Business and Trade has declared its commitment to supporting UK businesses as they navigate these changes.

Nonetheless, businesses must be proactive when it comes to understanding the new regulations and complying with them.

This should involve speaking to your accountant or financial adviser to find out what VAT rates you may be liable for.

For guidance surrounding EU tax regulations and VAT liabilities, please contact us today.


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