WHILE the addition of 10 new countries to the European Union means access to more skilled workers and increased export opportunities, it also brings with it "significant tax implications" for UK companies.

Rabjohns Business and Tax Advisers, in College Yard, Worcester, say businesses dealing with the 10 new countries, which joined the EU on May 1, will have to address their accounting systems, especially in the area of VAT.

"Businesses selling goods to VAT unregistered customers in the new member states now have to charge UK VAT, whereas prior to April 30, these sales were exports and zero-rated," said Richard Shaw of Rabjohns.

"These businesses also need to monitor the values supplied to each member state in order to identify the point at which the distance selling threshold is exceeded and VAT registration in that state is required."

International accounting firm PricewaterhouseCoopers agrees there will be significant changes to the "tax landscape" and warms non-compliance could lead to companies being brought before the European Court of Justice.

"Those companies affected, or planning to undertake future business activity with the 10 accession countries, should have already re-evaluated their systems to ensure they are fully compliant," said David Moore, head of tax at PWC.

"If they have not, I would urge them to act now without delay."

The Confederation of British Industry, meanwhile, has welcomed EU enlargement, saying the British economy will benefit from the "controlled entry" of workers from Eastern Europe.

However, chief executive Digby Jones said the CBI did not advocate a "throw open the doors to everyone" policy and urged the Government to enforce a "strict but fair" policy.

"A one per cent increase in population through immigration can result in a one-and-a-half per cent increase in Gross Domestic Product," said Mr Jones.

"The oft-repeated call from businesses of 'I can't get enough skilled people' can be met, in part, by managed migration."

Contribution

The Institute of Directors agrees with this, saying workers from the new EU member states can make an "important contribution" to the UK economy.

An IoD survey showed 60 per cent of members felt workers from the new member states could "help plug the skills gap" in Britain.

"IoD members recognise that workers from the new member states offer the strong work ethic and skills that we need to maintain Britain's economic success."