Amidst Brexit Related Issues, Another Challenge Is Setting In For The UK Around VAT Treatment

The European Commission has charged allegations against the government of United Kingdom for persistently allowing high tax breaks to commodity traders. The UK will be summoned in the European Court of Justice, European Union’s highest court, for engaging in unfair trade practices.

The sudden uproar intensified the long going conflict that began in 2018 when Brussels initiated an investigation around whether Britain was abiding closely by the rules, laid out in 1970s, as member of the single EU market and paying its legally mandatory minimum amount of value added tax on commodity trading.

It has been a tedious and long process for the European Union to have built a global club whose governance design was uniformly accepted by all members participants, as economic structure, laws and institutions across the countries were diverse and complex.

The EU has the legal right to file proceeding against the UK with two months before Britain withdraws from the bloc. This is because the Brexit treaty, as proposed by the Prime Minister to Brussels, entails such a provision and the UK will have to abide by the rulings to be scheduled by the European Court of Justice as an obligation for a case launched during the 21-month transition period ending on 29 March 2019.

While Britain assertively believes that it has all the rights, as per the rules, to apply a zero VAT rate to commodities contracts traded on the central terminal markets such as the London Metal Exchange, the commission has argued that the UK had widened the scope of the allowance which was no longer limited to only commodity trading as prescribed. According to Brussels, the alleged country has adopted an unfair strategy to enhance and strengthen the City of London’s position as the largest global commodity trading centre up against the other EU financial markets.

Essentially, the UK has unlawfully amended the original exemption by at least eight times without seeking sanctions from the European Union and including commodity options and futures contracts in the array of trading. Despite repetitive accusations, Britain stands firm in its ground and claims that its trade policy has always been well within the scope of the guidelines as inflicted upon by the EU, rendering the charges as false.

The UK parliament is already bearing the pre-Brexit tumults. However, with the growing number of issues and disturbances, the tensions seem to be escalating between the two parties and the competitiveness of the city of London post Brexit appears to be threatened worldwide. In addition, with the recent formidable parliamentary defeat of Mrs Theresa May’s Brexit proposal, it is evidently becoming clear how difficult it is for the UK to retreat out of a long-existing economic and political ecosystem, run and controlled by the European Union and operate separately with an overall cordial relationship. Thus, the country needs to work out a harmonious way to retain its position in the financial world after the separation and revaluate or justify its VAT treatment.


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