The main focus of 2020 has been the Coronavirus Pandemic, rightfully so. However, Brexit is still looming on the horizon, and as the transition period ends and we officially leave the EU, businesses need to prepare. A year of lockdowns has already had a devastating effect on many businesses and allowing Brexit to do the same could lead to irreparable damage. With this in mind, business owners need to know all the facts on trading in a post-Brexit economy. Of course, much of the fine print is still unwritten, but there are ways to ensure your company is in the strongest position possible as 2021 approaches.
Employees
One of the most worrying aspects of Brexit is the effect it will have on EU citizens, living and working in the UK. There is going to be a transition period between the time that we leave the EU and the time that the UK government launches a new immigration system. It’s during this time that businesses who employee EU, EEA and Swiss citizens need to direct these employees to the EU Settlement Scheme. However, it’s worth noting that the scheme is only running until 30th of June, 2021, so time is of the essence.
As with many aspects of Brexit, information on immigration and upcoming changes can be found on the official government website.
Taxes
Taxation, specifically VAT is something many business owners are worried about. Under the current system, businesses follow the “place of supply” rules where VAT is charged according to the guidelines of the country where the product or service is supplied. When it comes to actually paying VAT, currently, businesses trading within the EU will report their imports and exports quarterly and then calculate their VAT bill.
Fortunately, guidance from the government has said that the current “place of supply” rules are likely to remain for the majority of businesses. However, the worry is that VAT will have to be calculated and paid upfront, every time a business trades with the EU. The government has reassured us that they are implementing postponed accounting, allowing business owners to account for import VAT on their normal return forms.
The rules around VAT are likely to change in the near future, and if you’re unsure on current guidance or you just need some help getting your head around it all, it’s best to seek help from a trained accountant.
Trade Rules
Businesses that trade internationally – which is the vast majority – are heavily influenced by tariffs. The cost of tariffs will dictate the viability of selling abroad and the potential profit, or lack thereof. One of the many uncertainties around Brexit is how tariffs and duties will change and what this means for businesses. This uncertainty could prevent companies from making long-term contracts and investments, potentially leading to a substantial loss of revenue.
Post-Brexit trade rules are yet to be finalised, and it’s likely to be a slow process. The only way to stay ahead of this potential problem is to remain up to date. You can visit EU tariff databases online for real-time information. It’s also important to prepare for a period of potential disruption in January. Again, working with an accountant is the best course of action.
Customs
Free movement of goods within the EU will be coming to an end in the new year, and businesses will also need to prepare for this. Companies who do business within the EU will now have to make customs declarations when exporting goods to member states. Fortunately, the government is embracing a phased approach to this, providing businesses with the time and space to adapt to this change.
Stage one will run from January to the end of March, and during this time, only specific goods will be subject to the full customs process.
Stage two will run from April to the end of June and new rules with be introduced for animal and plant products. From April onwards, all animal and plant products will be subject to both sanitary and phytosanitary procedures. Businesses will also need to produce all of the relevant documentation for these imports.
Stage three begins in July and introduces full customs procedures, applicable to all imported goods.
It’s an uncertain time for UK businesses, and it’s understandable to have worries about the future. However, the best way to prepare for these changes is to regularly check the official government website for news and updates. The Get Ready for Brexit Checker is a fantastic place to start.
