A chartered tax body has said that the current guidance on VAT, should the UK crash out of the EU, is so lax that it justifies delaying Making Tax Digital.

This, according to the body, is the most pressing problem for MTD, which is set to start just as the UK would come out of the EU. In addition, many firms obtain VAT refunds from EU countries using the single market mechanism and this may not be possible once the UK is no longer part of the EU.

The association says that in the case of a no-deal, UK companies may be redefined as ‘third country companies.’ If this happens, EU countries may not refund VAT to the UK, which is the currently the norm with companies in third countries such as the United States.

In addition to this, if the UK is redefined as a third country, the technology systems of British firms would need to be changed and this would add additional complexity to the VAT system.

Chas Roy-Chowdhury of the ACCA said: “This further complication to VAT submission would clash dramatically with the government’s new online tax system, due to come into effect just three days later on April 1st. To prevent this clash creating disorganization for small business owners, [we] are calling for the government to be more precise than their current guidance released back in August and produce specific scenario plans for the various potential outcomes of a no-deal Brexit on VAT.”