September 2019
The UK is due to leave the EU on 31 October 2019, but uncertainty over the eventual date and form of Brexit continues, with Parliament now suspended until 14 October 2019. Nevertheless, it is important for businesses to plan for the consequences of Brexit, whether or not a withdrawal deal is agreed with the EU. The Government recently provided a “Get ready for Brexit” tool, and we have prepared a “10 key action points” summary.
The tool provides detailed guidance for individuals and businesses on the legal and regulatory requirements for continuing to work, travel, trade goods and provide services between the UK and the EU following Brexit. Information is provided for businesses across a wide range of sectors, detailing what needs to be done and when it needs to be done. This includes:
In the very short term, businesses should now take urgent action to address the potential consequences of no-deal and specifically the new business boundaries and related administrative and duty costs.
Whatever the size of your business, you should prepare your supply chains, workforce, VAT registrations, processes and cash flow for this scenario. We list below 10 actions that will help you prepare your business for no-deal. The list is based on our experience of helping clients prepare, and advice from the Government. Most of the actions will put your business in a better position to succeed in the uncertain times after Brexit.
1. Make cross border cash payments before 31 October 2019
If withholding tax (WHT) is likely to be payable on cross-border payments within your group after Brexit, consider bringing forward dividend, loan interest/capital payments and royalty payments to benefit from existing rules. Check out the WHT for different EU countries using our online tool.
2. Make VAT reclaims on expenses under the European Council’s 8th directive
It can be difficult to obtain VAT repayments from the tax authorities, but there is an established online mechanism for reclaiming VAT on business expenses incurred within the EU. After a no-deal Brexit, UK businesses will only be able to use a paper-based 13th Directive process under which refunds can take much longer. Therefore, make claims now to limit the impact on cash flow.
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.
4. Protect your cash flow from customs duty and import VAT
Customs simplifications such as Customs Warehousing, Transitional Simplified Procedures and Inward Processing Relief can help protect your cash flow from short-term customs duty and VAT charges, so putting them in place before Brexit could save you time and money.
5. Ensure you 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 is making grants of up to 100% of the cost of training for employees on the new customs arrangements, up to a limit of £2,250 for each course. Find out more about the Customs Training and IT Grants scheme.
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 after Brexit.
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 from 1 November? 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 after a no-deal Brexit.
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 for a no-deal Brexit.
10. Stock up to help manage transport delays
The pre-Christmas period is one of the busiest for cross border goods traffic but there could be delays at UK borders after Brexit. If you import or export – getting advance supplies in place now will ensure that you can maintain sales in the run up to Christmas.
Businesses that have already put contingency plans in place are likely to be best placed to succeed in the new environment, but no business should be complacent – the immediate post-Brexit business environment could well differ significantly from original assumptions. All businesses should review their plans in light of what we now know, to identify any further action that may be urgently needed.
As well as issues to be managed, in the longer term there will be new business opportunities to take advantage of – particularly from any new trade agreements that the UK may be free to negotiate once it is no longer part of the EU.
Stuart Lisle
stuart.lisle@bdo.co.uk