Brexit Preparations – the countdown is on
On Friday 31st January at 2300hrs, the United Kingdom left the European Union.
What does this mean?
As of the 1st February 2020, the UK will have formally left the EU. In the short term, nothing will change during the 11 month transition phase:
- Until 1st January 2021, EU and UK companies will continue to trade as if the UK was still a member of the EU.
- There will be no Sanitary/Phytosanitary check between the EU and the UK.
- EU & UK citizens respectively will still be able to travel freely between both jurisdictions.
- The UK will still implement EU legislation.
The transition phase will end on January 1st, 2021. From that point on, the UK will no longer apply the rules of the European Union, the Single Market or the Customs Union.
In practice, unless a free trade deal is agreed between the UK and EU in 2020, tariffs will most likely be applied and customs declarations will be required for Imports and Exports from the EU.
What can I do?
At BDO, we strongly advise traders to prioritise Brexit preparations now to get tariff mitigation procedures in place and to avoid the panic that will inevitably accompany the 31st December 2020.
The Trader Support Service, announced by the UK Government in August 2020, is a £200m customs support service for firms trading in and out of Northern Ireland set up to ease the administrative burden after the UK’s transition from the EU. The service will be free to use and companies are able to sign up now.
From 1 January 2021, under the terms of the Northern Ireland Protocol, traders in the province must also follow EU Customs Union rules on moving goods as well as new UK regulations. You can find more information regarding businesses engaging in new processes under the Northern Ireland protocol here.
You can register an interest in the Trader Support Service and keep up to date with other changes due to the implementation of the Northern Ireland Protocol by registering your interest here.
Our Brexit taskforce team are ready to support you with any query regarding preparing for Brexit, please contact them today or log your query here.
BDO advise that companies trading with partners in the EU take the following steps:
1. Make cross border cash payments before the exit date
If withholding tax (WHT) is likely to be payable on cross-border payments within your group after 1st January 2021, consider bringing forward dividend, loan interest/capital payments and royalty payments to benefit from existing rules.
2. Make VAT reclaims on expenses under 8th directive
Tax authorities are not keen on repaying VAT but there is an established online mechanism for reclaiming VAT on business expenses you incur within the EU. It is likely that UK businesses will only be able to use a paper-based 13th Directive process which means refunds can take much longer. Therefore, make claims now to limit the hit to your cashflow.
3. Know your customs duty rates
Confirm what duty tariff you will be paying on your trading goods: some tariff rates will go up but others will go down under a temporary new UK tariff that will apply after a no-deal Brexit. As well as planning for the impact on your imports, don’t forget that UK businesses currently benefit from the EU’s trade agreements with many countries so your exports may become more expensive to some customers.
Find out more about the BDO customs and international trade services.
4. Protect your cashflow from customs duty and import VAT
Customs simplifications such as Customs Warehousing, Transitional Simplified Procedures and Inward Processing Relief can help protect your cashflow from short term customs duty and VAT charges so putting them in place before Brexit could save you time and money.
5. Ensure you will get the paperwork right
Check that your systems are set up to handle the new VAT requirements and customs arrangements and make sure your teams have been trained on what they need to do. The government recently made grants of up to 100% of the cost of training for employees on the new customs arrangements, up to a limit of £2250 for each course. No announcement has yet been made about this grant reopening but the need for trianing remains.
6. Check your data transfer and protection obligations
Check what restrictions there will be on transferring data across borders after Brexit, and put new policies in place now to prevent potentially expensive breaches of rules in EU countries. You may need to change your contract terms to comply. Read the government guidance.
7. Adjust your contract terms
Where your post-Brexit trade will incur additional duty, administrative costs for transport or other costs, you should review your terms of businesses with customers. Whether or not you choose to absorb these costs, it is vital to communicate any changes to your customers so that there are no unpleasant surprises.
8. Day One trading in the EU
Check that you have the licences/permits/approvals you need in all the other EU states in which you operate so that you can carry on trading as you do now. For example, are local VAT registrations needed? Should your product labelling change? Are you set up to make any new tariff payments needed? HMRC’s ‘Get ready for Brexit’ information service provides a wide range of information on the licences you may need.
9. Secure your staff here and in the EU
Check if your UK staff that are based in the EU will be able to work after a no-deal Brexit – will they need a local work visa? For EU staff based in the UK, check that they have applied for settled status or pre-settled status in the UK and understand the recently announced transitional arrangements.
10. Stock up to help manage transport delays
There could be delays at UK borders. If you import or export – getting advance supplies in place now will ensure that you can maintain sales.