With little certainty about the outcome of the UK’s position post Brexit, businesses must begin their preparations for change.
While this may seem daunting, there are some steps which can be taken now and choices and opportunities might be identified in the process.
Key challenges are likely to be concerning:
Most businesses with international supply chains and an international customer base regard delays in the movement of their goods as serious hindrances. Look ahead now to minimise problems later.
Many businesses have built up long and complicated supply chains. Where these are totally within the EU, the movement of goods and services has been relatively straightforward, but post Brexit there may be delays. Friction in a supply chain means additional cost. The key to success is definitely digital.
Now is the time to make sure you really understand your supply chain. The more you understand what it looks like, where the challenges are and what opportunities exist to make change, the easier it will be to implement these when we know what Brexit looks like.
Although we don’t know how extreme our Brexit will be, we do know that if we simply leave the EU, the trading arrangements applying to cross border trade with countries still in the EU will become the same as we already have with those in non EU countries where no special arrangements exist.
Those businesses which have previously traded only with other countries in the EU, will have to learn some new language and new rules post Brexit.
So what are imports, acquisitions, exports and dispatches and why does this matter?
A business imports from outside the EU
A business has acquisitions from within the EU
Consider a very simple example. Choco Ltd is VAT registered and buys chocolate biscuits from France. This particular biscuit is categorised as standard rated for VAT when resold in the UK.
Pre-Brexit – Choco makes an acquisition of £1,000 standard rated biscuits from France. Acquisition VAT must be accounted for on the next VAT return, so Choco Ltd would pay the French supplier £1,000 and declare the acquisition VAT of £200 as output VAT on its next VAT return. This £200 is paid along with any other VAT on sales and is also deductible as input VAT from the quarter’s output VAT in the usual way.
Post Brexit – Choco makes an import of £1,000 standard rated biscuits from France. It will continue to pay the supplier £1,000 but will now have to pay £200 (plus any applicable customs duty) to HMRC to clear goods at the port or defer the £200 (plus any applicable customs duty) against a duty deferment account to be paid the following month (note that there is a likely additional cost for a guarantee to obtain a duty deferment account).
A business exports to countries outside the EU
A business makes dispatches to countries within the EU
Exports and dispatches both require evidence of movement outside the UK, although evidence differs.