What might No Deal mean?
In the event of a no-deal by the end of this year, COVID-19 is likely to have compounded some of the key issues for businesses. Previous Brexit stockpiles have been run down during the lockdowns and not all of them replaced, there are reports that UK ports are blocked up by PPE imports and that getting port and container space has been difficult. It is likely that many businesses are less well prepared then they might have been 12 months ago.
The changes for any UK business trading with the EU could be hugely significant. UK businesses could face tariffs and new regulatory burdens when they sell into the EU. These would increase costs and make them less competitive relative to their European competitors. Goods could also face delays and customs checks when they enter the EU, which would delay arrival at their customers and again increase costs.
The impact will depend also on the sector in which your business operates. Tariffs and regulations vary from product to product, and some sectors face particular issues. For example, Agriculture will likely be hugely affected, as any transition even to WTO rules will be difficult and complicated.
The most likely result for businesses over the next few months is ongoing uncertainty about what the future nature of the UK EU relationship looks like.
We can speculate on those issues but there has been little definitive guidance from the government and won’t be until deal or no deal is announced, so like most firms, it is a case of prepare as best we can and wait and see.
Brexit – Things to consider with less than 1 month to go
Whatever the outcome there are significant changes ahead for travel and trade.
Travel
If you are travelling to the EU from the UK after the 1 January 2021 then check out the Government website “Visit Europe from 1 January 2021”. This page tells you how to prepare if you’re planning on travelling to Europe from 1 January 2021. It will be updated if anything changes.
See: https://www.gov.uk/visit-europe-1-january-2021
UK Government Guidance
If you haven’t made your business preparations, the first place should be to check the government’s Brexit transition website:
Businesses Trading with the EU
If you trade with the EU then here are some of the actions you may need to take:
- If you haven’t registered for an Economic Operator Registration and Identification (EORI) number do so now, it’s a relatively easy process and all businesses should get one just in case- https://www.gov.uk/eori
- Consider an agent to help with completing import/export forms – export.org.uk
- If you export goods see the step by step guide here: https://www.gov.uk/prepare-to-export-from-great-britain-from-january-2021
- Export rules are specific by sector so review “The transition period ends in December” Government website. There you can get a personalised list of actions and can subscribe for email updates: https://www.gov.uk/transition
- If you import goods then see the guidance “Starting to import”: https://www.gov.uk/starting-to-import/moving-goods-from-eu-countries
- There is a step by step guide on importing here: https://www.gov.uk/prepare-to-import-to-great-britain-from-january-2021
- Review HMRC YouTube videos on international trade here: https://www.gov.uk/guidance/help-and-support-for-international-trade
VAT
Businesses that trade with the EU must get familiar with customs declarations as these will be essential for accounting for VAT.
- The VAT reporting rules for EU sales can be found here: https://www.gov.uk/guidance/vat-how-to-report-your-eu-sales
- Guidance on paying VAT on imports can be found here: https://www.gov.uk/guidance/vat-imports-acquisitions-and-purchases-from-abroad
Businesses employing non-UK workers
If your business relies on EU or other non-UK workers then check out the transitional arrangements to 30 June 2021 and the new rules here: https://www.gov.uk/settled-status-eu-citizens-families
Agriculture
Last week the Agricultural Bill was debated and eventually passed through Parliament. This removes the Common Agricultural Policy and replaces it with new UK supports for farmers. The Government agreed that farmers will receive the same level of support as they currently do through the Common Agricultural Policy until 2024, while the current system of subsidies is gradually phased out.
See: https://services.parliament.uk/Bills/2019-21/agriculture.html
We can expect to see further progress to bring existing EU laws and rules into UK legislation before the end of the transition period. For example, the Financial Services Bill was introduced on the 21 October to maintain the UK’s regulatory standards and openness to international markets.
This Bill is the first step in shaping a regulatory framework for the UK’s financial services sector outside of the EU.
See: https://www.gov.uk/government/news/financial-services-bill-introduced-today
New Trade deals
In addition to passing legislation to ensure UK rules and regulations are transparent at the end of the transition period, the Government is also negotiating new trade deals. Whilst the UK was an EU member, the UK was part of 40 trade deals which the EU had with more than 70 countries. More than 20 of these existing deals, covering 50 countries or territories, have been rolled over and will start on 1 January 2021.
It is worth noting fifty-two countries currently have free trade deals in place with the UK for the end of the Brexit transition period. These agreements account for only 10 per cent of the UK’s total cross-border trade, according to last year’s figures from the Office for National Statistics (ONS).
On 23 October, the Government signed a new trade agreement with Japan, which means that 99% of UK exports there will be free of tariffs.
There are further trade talks with Australia, the US and New Zealand. If and when these talks come to a trade deal only time will tell.
EU-UK trade accounts for half of overall UK trade and seven of the UK’s top ten trading partners are EU members. While other trade deals are important, the trade deal with the EU is going to have by far the greatest impact on the UK economy
Impact on Supply Chains
Depending on what contracts a business has with its customers in Europe, it may have to factor in that goods could take longer to get there, meaning extra costs and administration.
In the short term, there will probably be delays at the border, so it is important businesses map out supply chains and think about how to do things as efficiently as practicable post-transition.
Please talk to us about your plans post-transition, we can assist in a number of ways including helping you account for VAT, looking at your accounting systems and pointing you in the direction of specialists to assist with the Trading administration.
Setting up operations within the EU
Whether or not you will need to set up operations in the EU will depend on the details of any trade deal or no deal. An EU company can take 3 months to set up and another 6 months to get compliance in place. In some sectors such as transport and financial services, it is likely to make sense to set up an EU operation now to mitigate against any no-deal impact. For other firms, it may be a case of wait and see.
Get your professional qualifications recognised by EU regulators to be able to practice or service clients in the EU.
Starting the process to get your professional qualifications recognised by EU regulators by 31st December 2020 may help you to practice your profession (e.g. accountancy, engineering) in the EU.
COVID-19 has pushed Brexit down the agenda for many businesses this year, however, it is still happening on December 31st and we are still not sure of whether there will be a deal or no deal.
It is worth noting that even if there is no deal by the end of this year we would expect the UK and EU to continue negotiating a new deal beyond this date. Our trading relationship with the EU does not end on December 31st so both sides will want to continue trying to resolve any issues.