How will Brexit affect your business after 31 December 2020?

Brexit is beginning to take up more news headlines again, with the transition period ending on 31 December 2020 and new rules for businesses and citizens come into force on 1 January 2021. Whilst it is not yet fully known what will happen with regards to trade between the UK and EU countries, and we will not know the outcome until we have confirmation on the final trade agreement, businesses should take action now and review their procedures and consider how this will affect them. 

Businesses will be faced with an immediate requirement to adapt, as free trade and free movement of people will change, affecting both goods and services. This will have far-reaching impacts, from recruiting staff, especially in the hospitality and farming industries, to delays or additional tariffs for the import and export of goods. Whilst this will have an impact across all industries, this could particularly affect the manufacturing sector.

Some of the main areas of change businesses should consider include: 

  • Taxes and duty
  • Personal data
  • Safety standards
  • The movement of goods
  • The movement of people

How will Brexit affect your business with regards to trading between the EU?

Generally, there will be impacts across a wide range of business areas whether or not new regulations are agreed between the EU and the UK. 

Business areas that will be impacted will include: 

  • The Import and export of goods to and from EU countries, including VAT and any future custom and excise duties 
  • Transport and logistics
  • Copyrights, trademarks and patents
  • Environmental industrial standards
  • Product safety and compliance with environmental standards
  • State aid
  • The recognition of qualifications and relevant licences (such as audit and Banking regulations)
  • Personal data transferred between the UK and the EU and vice versa 

What is already known regarding how Brexit will affect your business? 

Many rules and regulations are already known and will automatically apply from 1 January 2021. Many of these rules and regulations regarding trading between Northern Ireland and the EU will not apply in the same way. This is still an area where policy is still developing.

Importing from the EU from 1 January 2021

The process of importing goods from EU countries will generally become similar to how goods are currently imported from non-EU countries. 

An EORI number, staring with GB will be required and goods will need to be declared when they enter Great Britain with an entry summary declaration. Goods will be eligible for import VAT and customs duties. Import VAT payments can, however, be postponed.

Up to 30 June 2021, a supplementary declaration for imported goods from the EU can be made, if preferred. Using this method, you would record the goods in your own record keeping account for any VAT making the declaration within six months after the import date.

How will Brexit affect your business?

There are several requirements in order to make a simplified declaration. Further information is available here.

To remove much of the burden of the logistics of importing and exporting, a third-party company can be utilised to undertake this function, which can reduce the paperwork. From 1 January 2021, these will need to be based within the UK.

Postponed VAT Accounting for imports from 1 January 2021

Being introduced from 1 January 2021 for all imports of goods, Postponed VAT Accounting allows a UK VAT-registered entity to account for import VAT on goods imported into the UK on its VAT returns, paying and recovering import VAT on the same VAT return. 

This will apply to goods imported from all countries, both EU and non-EU.  

Authorisation from HMRC is not required to use this method, however, your EORI and VAT number will be required on the customs declarations.

The import of goods not exceeding £135 in value is subject to different rules. These will no longer attract import VAT, with the seller applying supply VAT at the point of sale.

Where these goods are sold to a VAT-registered business, the UK VAT is reverse charged to the customer. This should assist in a quicker clearing of customs.

If these goods are being sold to a consumer or non-VAT-registered business, the seller will need to have registered with HMRC and account for UK VAT as they will need to charge UK VAT.

Exporting goods to the EU 

To export goods from 1 January 2021, the rules will be similar as if you were exporting to a non-EU country.

Again, an EORI number will be required. A customs declaration will now be required for most businesses, with certain goods also requiring export licences or certificates.

For many goods, a simplified declaration can be made before your goods are exported from the EU.

The benefit of this is that the first part of the declaration does not require the same level of information as a full declaration. Once approved, your goods can be exported

Customs will still need to be provided with the additional information, but this is sent later within a supplementary declaration. This allows customs to work out the VAT and duty that you are required to pay.

Exporting goods from the UK to non-EU countries from 1 January 2021

From 1 January the UK will no longer be part of the trade agreements between the EU and several non-EU countries.

Whilst it is the UK Government’s aim to agree new trade agreements, in the interim World Trade Organisation Most Favoured Nation Rules will apply. This included the US.

Businesses will need to check whether any product testing, certification and conformity agreements are in place. Guidance for each country is available from the UK government, which can be accessed here.

Any good that are sold in the UK that currently require a CE mark will need to be replaced with the UKCA mark. Good sold in Northern Ireland are still being negotiated.

Goods can still be placed on the market in England, Scotland and Wales using the CE mark, until 1 January 2022, providing they meet EU requirements, where these are also the same as UK requirements.

Personal Data and GDPR

The existing GDPR regulations will be brought into UK law, known as ‘UK GDPR’ where the UK will have the independence to keep the regulations under review. 

There may be additional legislation agreed on how specific issues are dealt with, such as the transfer of data to and from the EU to the UK, this is still an area to be agreed.

Employing EU nationals after the transitional period

A job applicant’s right to work will still need to be checked in the same way as now until 30 June 2021.

During this period, job applicants can prove their right to work as follows:

EU, EEA or Swiss citizens – by using their passport or national identity card

non-EU, EEA or Swiss citizen family members – by using an immigration status document, listed in the right to work checks employer guide

EU, EEA and Swiss citizens & family members – by using the online right to work checking service

There is a duty not to discriminate against EU, EEA or Swiss citizens. You are not permitted to ask these citizens to show you their status under the EU Settlement Scheme until after 30 June 2021.

Irish citizens – there will be no change as to how they prove their right to work in the UK

employing eu nationals brexit

From 1 January 2021, a new immigration system applies to people arriving in the UK. EU citizens moving to the UK to work will, from this date, require a visa in advance.

For a skilled worker visa, EU citizens will need to show that they have a job offer from an approved employer sponsor to apply. 

Any employer not currently an approved sponsor, who may be planning to sponsor a skilled migrant from 2021 should consider applying to be approved now.

EU, EEA or Swiss citizens and their family members, residing in the UK before 1 January 2021 need to apply to the EU Settlement Scheme to continue residing in the UK after 30 June 2021.

UK businesses that do not trade directly with the EU

Even if you do not trade directly with the EU, you are likely to be affected in some way as the transition period ends. 

For any business that purchases from another UK based business, if their goods or services are procured from the EU there may be a delay in delivery(due to customs clearance), or a price increase, due to changing tariffs. Some businesses may have stock warehoused in the EU, even if it originated from elsewhere.

Any EU trademarks (EUTM) may need to be registered again depending upon what intellectual property protection mechanisms are agreed for businesses in the UK trading overseas from 31 December 2021.

How can Alexander & Co assist businesses with Brexit?

There is no doubt that preparing a business for the end of the transition period continues to be difficult due to the current uncertainty.

Whilst we will not know the outcome until we have confirmation on the final trade agreement, as we have highlighted, there is a lot of information available to help you prepare. Acting now and understanding will help alleviate any problems your business may face at the end of the transitional period.

Contact our team for further guidance

If you need advice on any aspects of the implications to taxation, accountancy practices or more general business advice, we are here to assist.

For more information, please contact us on 0161 832 4841, email or fill out the form below and we’ll be in touch.

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