Are you ready for a “No deal” Brexit

Hillier Hopkins LLP

Chartered Accountants & Tax Advisers

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The UK’s upcoming departure from the European Union will bring significant changes to UK businesses. With so much uncertainty regarding the exact details of Brexit, it can be very easy for complacency to sink in.However, the consequences could be significant if you don’t get your business ready for “No Deal” Brexit.

That’s why we recommend you undertake a review of your business ASAP to ensure you’re in the best position to survive and thrive after the UK leaves the EU.

Here’s a checklist of the key areas to focus on:

Movement of goods and supply chain

  • It’s important to carry out a thorough review of your supply chain. What tariffs may apply to you? If the UK were to leave the EU without a trade deal then exports and imports to EU countries would become subject to tariffs under the World Trade Organization (WTO). What steps can you take to mitigate the effects of delays at ports? Even if you do all your business within the UK, consider that tariffs and delays at ports could still have an indirect impact;
  • If you import or export goods then it’s essential you have an Economic Operator Registration and Identification (EORI) number. HMRC has recently announced that it is trying to identify those businesses that move goods to/from the UK/EU and will issue an EORI number automatically to those taxpayers. If you have not received a letter from HMRC allocating you a number, you can apply for an EORI number here.;
  • If you are continuing to trade within the EU, you will also need an EU EORI number. This can be applied for in one Member State and then used across the EU. Some Member States are allowing applications now, before the UK exits the EU and others are insisting on waiting until the exit has happened. Check the import rules here. There are further links to the individual Customs and Tax Authorities contained within the guidance;
  • In the event of a no-deal Brexit, importers can register for Transitional Simplified Procedures (TSP). This will allow for you to complete customs paperwork away from the port. However, you will have legal obligations to fulfil and will need a duty deferment account (see below). You will still need to a file a supplementary declaration, but this can be within 6 months of the import of the goods;
  • Postponed accounting – This will allow you to account for VAT on all imports on your VAT returns in a similar way to how you already account for VAT on EU purchases of goods;
  • Duty Deferment – can allow deferment of duties payable on imports by up to 6 weeks. It also means that goods are cleared more quickly through the ports and airports. Deferment accounts have to be paid via a direct debit from a UK bank account and a bank guarantee is required to cover the duty that is likely to be payable per month. However, in the event of No Deal, HMRC is waiving the requirement for a guarantee for a period of 6 months post exit;
  • Use of agents – You can use an agent for your Customs documentation, but be aware that any errors are still your responsibility. This includes obtaining the documentation for imports and exports and notifying the various Customs Authorities;
  • Republic of Ireland/Northern Ireland Border (“ROI/NI”) – For a period of 6 Months, there will be no tariffs on goods moved from the ROI to NI which will remain in NI. VAT will, however, be due and you would account for this via your VAT return if VAT registered. If not VAT registered, you will need to register for a special scheme. At this point in time, there are no reciprocal arrangements for goods moving the other way! Goods moving through NI to the British mainland will be subject to tariffs and VAT on the mainland or must be moved under the Common Transit Convention (“CTC”) rules.

Contracts

  • Review all your contracts to assess whether they need to be terminated or renegotiated as a result of Brexit.
  • In particular

– you will need to check your trading and shipping terms to ensure that they specifically cover the UK and EU separately;
– You will need to check which legal jurisdiction has precedence on the contract in the event of any dispute.

People

  • Do you currently employee EU nationals in the UK? If so, you will need to check their right to work in the UK and they will need to apply for settled status. There is already a new EU Citizen Settlement Scheme in operation;
  • Be ready for new passport rules that may apply to British passport holders travelling to the EU. Visas may be required by EU member states for UK nationals staying for more than 90 days in any 180 day period. Likewise, EU/EEA/Swiss citizens wanting to enter the UK for more than 3 months to work, visit or study will require a visa.

Data Protection

  • – If you share personal data with organisations in the European Economic Area (EEA), ensure you continue to comply with data protection laws after Brexit. It’s likely that businesses will require additional safeguards (such as contract clauses).
  • There could eventually be changes in how the transfer of data from the UK to the EU is dealt with. However, at the moment the UK does not intend to impose additional requirements.
  •  While some sectors will be effected more than others, it’s important to identify any regulatory changes for your products or service. Ensure that your documentation is up to date for all standards, certification, packaging and labelling requirements. In particular:

Industry-specific regulation

  • While some sectors will be effected more than others, it’s important to identify any regulatory changes for your products or service. Ensure that your documentation is up to date for all standards, certification, packaging and labelling requirements. In particular:
    -The pharmaceutical sector may require testing in both the UK and EU, as well as dual regulation by an oversight authority. You will need to check that the licences for your products granted in the UK prior to Brexit will still be valid after Brexit. In most cases, dual registration will be required;
    -Road hauliers will need green cards, international driving permits, tachograph driver card, certificate of competency, ECMT permit for certain cargoes, GB sticker and vehicle log book to transport goods to the EU. In addition, you will need cargo documents from your customer and copies of the relevant export licences if the goods are controlled (Animals and food products, high risk goods, chemicals etc.) You must also be satisfied that your client has made the appropriate declarations and provided you with the necessary proof before you move the goods. For some movements, you will need to obtain a barcode for scanning at Customs offices both in the EU and the UK. HMRC has produced a “Road Hauliers Handbook” and the link for this is: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/831190/transporting-goods-between-the-uk-and-eu-in-a-no-deal-brexit-guidance-for-hauliers.pdf

– Chemicals and lubricants – you will need to register with UK REACH for safety standards. Where you are moving chemicals to the EU, you are likely to need to be registered with a         similar body in the EU.

Cash flow

  •  Stress test your business to ensure it can cope with any problems such as currency fluctuations, new tariffs and border delays. Do you have access to sufficient working capital?

HMRC have also formally launched a Brexit checker which summarises the Brexit information you need to be aware of. You can reach this here.

If you’re worried about Brexit and would like some guidance to ensure your business is prepared, contact us and we’ll be glad to help. ​
Do you need extra information?
Ruth Corkin

Ruth has been involved with VAT for over 30 years. She started her VAT career as a Customs and Excise Officer in Essex and then moved into consultancy with a variety of well-known accountancy firms. She is well known in the VAT world and is the proud author of many articles and technical works.

Contact Ruth at ruth.corkin@hhllp.co.uk or on 01908 713 860