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Beyond the balance sheet

No-deal!? How to prepare your business for Brexit

Stuart Crook 06/9/2019 5 minute read

Stuart Crook FCA on the arrangements put in place by HMRC for a no-deal Brexit scenario.

On the day of the referendum result, we put up a post exclaiming don't fear, the UK exit from the EU means remain - for now. Little did we know then that over 3 years later, "for now" MAY be ending with some form of exit looking likely!


At present a no-deal Brexit is very much on the cards. We face the potential likelihood of a hard border with EU member states from 31 October 2019. In this post we explain what's being put in place by the government for such a scenario and how to prepare your business for Brexit if you trade with the EU. 

What to do to find the funds to help get your busines through a no-deal Brexit

The EORI system and how it works

Should there be a no-deal Brexit, HMRC have a customs system that VAT registered businesses will be enrolled into if you import from, or export to, the EU. To start with you'll be given an Economic Operator Registration and Identification (EORI) number.

This determines organisations trading with the EU. You will need this to complete relevant import or export documentation for the collection of duties. Of note, non-VAT registered businesses will have to apply manually. 

The EORI is a unique ID number allocated to you whereby your business can be identified by the Customs officials when trading. This ID ensures you can keep trading in the EU in the event of a no-deal exit.

 

 

If the EU is a market you buy from or sell into, then you need to make sure you've been allocated an ID. Those without an EORI number won't be able to trade in EU member states! 

According to the FT, HMRC have calculated that 245,000 UK businesses may need an EORI. Letters are being sent out to inform organisations of their EORI number.

"Transitional simplified procedures" for importers

If you import into the UK, you may be able to make use of transitional simplified procedures. These work whereby necessary paperwork and VAT duties can be completed away from ports. Again however, importers must register for this. There are also some other simplified customs procedures that are worth looking into. 

Existing EU systems that could no longer be available in a no-deal

As a member of the EU, we've relied on various systems to facilitate our exports and trade within the customs union. A hard exit will mean many of these may no longer be available.

The UK may no longer be part of the EU wide Tour Operators Margin Scheme (TOMS). Instead a UK only TOMS system could be introduced.

Infographic: Brexit: What Now? | Statista

Furthermore the Mini One Stop Shop (MOSS) VAT system, that applied to electronic services supplied to EU based customers, will likely no longer be available. 

Other things to look into:

  • The potential application of tariffs, more procedures, and different standards could place a real strain on your short term working capital. It may be advisable to seek finance to help you cope with the temporary hit to your cash flow. 
  • Where you employ EU nationals in the UK, they'll need to apply for settled status. If your business has been reliant on cheap EU workers, you'll need to consider other strategies, and sources, to attract and retain staff.
  • Exporters need to research instructions that may be put in place by EU-member states they trade into, not much detail exists yet on cross-border customs procedures.
  • Check out this government advice on exporting after Brexit if there's no deal which is a country-by-country guide.
  • 57% of UK exports are to non-EU countries and could be subject to World Trade Organisation (WTO) tariffs, exporters may therefore be familiar already with this but need to look at extending the rules to all markets, potentially.
  • Trade standards, labelling and certifications will see the UK aligned to the EU at the point of exit, however, the EU may decide not to recognise this. Be sure to review the British Standards Authority website for such matters.
  • Importers should be aware of the temporary rates of customs duties (tariffs) that will apply if there's no deal.
  • The government has proposed ‘postponed accounting’ for import VAT on goods brought into the UK – business will account for import VAT on their VAT return.
  • Review the validity of contracts across EU territories to clarify the terms of trade across such borders.

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The content of this post was published on 04/09/2019 and updated on 06/09/2019.

Please be aware that information provided by this blog is subject to regular legal and regulatory change. We recommend that you do not take any information held within our website or guides (eBooks) as a definitive guide to the law on the relevant matter being discussed. We suggest your course of action should be to seek legal or professional advice where necessary rather than relying on the content supplied by the author(s) of this blog.

 

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