RISHI SUNAK'S BREXIT BAFFLEMENTS

 

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RISHI SUNAK’S BREXIT BAFFLEMENTS

 

I normally visit the USA every Autumn and spend some time in Chicago attending both the Illinois Society of CPAs annual event and the Chicago Jazz Festival and trying to fit in a couple of Chicago Cubs games.  I missed out this year but am keeping my fingers crossed for next year.  I mention this because there were a few acts at the Jazz Festival last year that I particularly liked.  I thought of buying their CDs at the festival, but thought I’d probably get them cheaper on Amazon when I got home.  I overlooked the fact that even Amazon can’t stock everything and ended up tracing the local Chicago record company and buying mail order from them.  Buying mail order from the US obviously means that I have to pay VAT and Customs duty to import the CDs.  The system is that the Post Office pays these and insists that I repay them (plus a small fee for their trouble) before they hand over the CDs.  This seems to me to be a sensible system that works well.  It applies where the value of goods is under £135.

You may have noticed that when things are sensible and work well, sooner or later the government will scrap the system and replace it with something much less suitable.  This is an example of Hutter’s law (promulgated by a former City Editor of the Sunday Telegraph) which is that “in government, improvement means deterioration”.

From 1 January, the Post Office will no longer collect my VAT and Customs duty next time I import CDs into the UK.  Instead, the small record company in Chicago will need to register for UK VAT and do quarterly VAT returns if it continues to make such low value consignments to the UK.

What does the change achieve?  I wish I knew.  The most likely answer is a loss of tax and duty to the Exchequer, either because the record company does not know it needs to register or because, if it finds out, it will refuse to accept order from UK residents.  I somehow doubt that is what Rishi Sunak intends from the change though.

I appreciate that HMRC will publicise the change on their website, but somehow doubt that the HMRC website is regarded as essential reading by the average shopkeeper in Sydney, or record company in Chicago.  It is not even regarded as essential reading by most people in the UK let alone the rest of the world.  Does Rishi intend to make it a condition of his promised trade deals with other countries that the other country must explain to its populace that, if they want to accept orders from people in the UK, even for tiny amounts, they will need to register for VAT in the UK and, once in the UK VAT system, will have to complete quarterly VAT returns indefinitely (unless and until they can convince HMRC that they do not intend to make any future sales to UK residents)?

I don’t have a clue whether my Chicago record company has other UK customers.  I may be the only one.  If it has very few, it would be crazy to accept orders from the UK after 1 January because the administrative costs of dealing with VAT will far outweigh the profit it can make from UK sales.

I suspect that I am not the only person who buys things over the internet from overseas – or rather who likes to buy things from overseas but will be rebuffed from doing so after 31 December.

Fortunately, when I do go to America, HMRC have said that from 1 January 2021 the amount I can bring back without having to go through the Red Channel at Heathrow “will also be significantly increased … providing one of the most generous allowances anywhere in the world”.  The limit goes up to £390 (unless I travel on a private plane or yacht when for some reason best known to Rishi it is only £290).  In addition, I will be able to bring in 42 litres of beer, 18 litres of still wine and 4 litres of whisky – assuming that is, I feel up to carrying them and British Airways excess luggage charge is not going to exceed the VAT and duty if I buy them in the UK instead.  Most spirits nowadays are sold in 70cl bottles, so 4 litres is a curious figure.  Five bottles and one half bottle will come up to 3.85 litres and it surely would not have cost the Exchequer too much to make it 4.2 litres = 6 bottles, rather than 4.  This change of course also makes it apparent that under Boris’ Brexit there will be no return to the British Imperial measures; we will still be forced to drink in French litres instead of good old-fashioned English pints.

It is not only us UK citizens that Rishi wants to inconvenience.  From 1 January, foreigners buying goods in the UK will no longer be able to get them duty-free unless they can persuade the shop to pack them up safely and deliver them to the buyer’s home address.  Again, will the cost that the supplier needs to charge for packing them justify the VAT saving.  And they will no longer be able to buy electronics and clothing (and other unspecified items) duty-free at Heathrow – apparently because Rishi is worried that you and I will want to take them to America with us and bring them back home when we return, “putting High-Street retailers at a disadvantage”.

ROBERT MAAS