Read our quick-start guide, outlining a variety of areas that could impact your business, to help you start preparing for Brexit.
While there is still no certainty around what Brexit will mean and planning for it seems impossible, businesses that sell and buy from the EU need to have contingency plans in place which will need to be sufficiently flexible to cope with a variety of possible outcomes. ICAEW’s checklist covers the areas that should be considered, including movement of goods, product compliance, contracts, people, and financial planning (cash flow). These considerations reflect ‘no deal’ being reached in March 2019, but may also be relevant in other scenarios.
19 December 2018
The UK government says it is "unlikely" that no-deal will be reached for the future relationship of the UK and the EU by March 2019, and in November 2018 announced a draft withdrawal agreement and political declaration. The stakes are high but it’s in the interest of both sides to reach some agreement on a future trading relationship. The EU is the UK’s largest trading partner, counting for about 44% (2017: £274bn) of the UK’s exports, but conversely 53% (2017: £341bn) of the UK’s imports come from EU countries. The UK imports more goods from the EU than it exports (2017: £95bn deficit) but it exports more services than it imports (2017: £28bn surplus).
ICAEW’s Brexit hub contains information on the technical implications of Brexit for the accountancy profession, including:
In this guide we summarise the key business implications of Brexit. More detailed guidance is available in our framework for preparing your business for Brexit.
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If there is no deal, customs declarations will need to be completed. Can your business integrate with European and UK digital customs systems or do you have arrangements with a broker to do this for you? The UK is implementing a new electronic customs declaration system, due to be launched in 2019. Even if the UK has a free-trade agreement with the EU, customs clearance may still be necessary, and rules of origin might apply – requiring proof that exported products originated in the UK. It’s important to think now about the processes and systems that might need to be administered and the implications should you need to engage a broker at short notice.
The UK government has instructed exporters and importers to the EU to take action now to prepare for a situation where there is no deal (which they suggest is unlikely). You should familiarise yourself with this. It says that these businesses need to take three actions:
Guidance was published on 14 December 2018 on how to prepare for the customs declaration service, the new electronic customs system being introduced by HMRC.
HMRC provides further guidance here, including on providers of appropriate software.
You can stay up-to-date by registering for HMRC’s EU Exit update service. Go to www.gov.uk/hmrc/business-support, select ‘business help and education emails’, add your email address, select ‘Submit’, select ‘Add subscription’, choose ‘EU Exit’ then ‘Submit’.
Businesses may also need to apply for an export licence or provide supporting documentation to export specific types of goods from the UK and carriers (for example hauliers, and train, vessel or aircraft operators) will need to make a Safety and Security Declaration for goods moving between the UK and EU. When exporting duty suspended excise goods to the EU, a business will need to continue to use EMCS to record the duty suspended movement from a UK warehouse or premises to the port of export. On import, once excise goods leave a customs suspensive arrangement, they may be immediately entered into an excise duty suspension regime. A business will need to declare the goods on EMCS for onward movement via a Registered Consignor.
Could you benefit from authorised economic operator (AEO) status? This international scheme allows trusted entities simplified customs procedures. But it is best to apply early, the application process is complex and might take some time.
Supply chain mapping is an essential early step in Brexit planning. Knowing where your inputs come from, and what product category they fall into can help you assess the possible tariffs that might apply.
For those who export goods to the EU, for example, you should consider the implications of a worst case scenario. This would be that the UK will leave the EU without any trade deal and all exports and imports to the remaining EU countries will now be subject to tariffs under the rules of the World Trade Organisation (WTO). It is also important to remember that 57% of UK exports go to non-EU countries and might already be subject to tariffs or quotas depending on the arrangements the EU customs union has with the destination country. Some exporters will therefore already be familiar with customs procedures, but extending them to all exports will clearly come at a cost. A more serious problem will be faced by those UK exporters who only export to the EU, for whom applying customs procedures will be entirely new. In the event of "no deal", the transitional and ongoing costs for these businesses could be considerable in the short-term. You can find the WTO and EU third-country rates online.
Keep in mind that for major manufactured inputs you might need to consider where supplies originate.
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Non-tariff or "technical" barriers can be an even bigger barrier to trade than tariffs. These take a variety of forms. For example technical standards or regulations with which a product or service has to comply or assessment and/or certification requirements. Such rules might affect packaging or labelling. UK standards and regulations will be aligned with the EU at the point of exit, but it is possible that if there is no deal UK assessment and certification arrangements may cease to be recognised in the EU. The issues differ from sector to sector and you should familiarise yourself with the relevant government guidance.
The British Standards Institute (BSI) is a member of the European single standards system. The European standards bodies CEN and CENELEC are not agencies of the EU and their current membership is broader than the EU. BSI’s ambition post-Brexit is to remain a full member of CEN and CENELEC. BSI has published guidance regarding the continuity of their certification arrangements.
Businesses may wish to ensure that their documentation and databases of the standards, certification and labelling requirements that apply to them are up to date and accessible to staff planning for Brexit.
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Contracts might need to be renegotiated or terminated as a result of Brexit. It is particularly important that they adequately clarify the terms for trade across EU borders, including how VAT is dealt with. In the event of no deal, you will need to ensure that contracts and International Terms and Conditions of Service reflect that they are now an international exporter or importer; further guidance from the government on international trade paperwork is available below.
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|Immigration status and planning||Existing employees who are EU nationals will need to apply for settled status. it is important to plan for cut-off dates and any differential status that might apply to new arrivals to the UK. Businesses might need to consider how they will track the nationality status of employees and ensure immigration compliance. Businesses that have historically been reliant on EU workers might wish to investigate measures they could take to boost staff retention and motivation.|
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|VAT and duties||More complex port procedures could mean businesses need to be prepared to carry out more inventory, tying up additional working capital. In the event of no deal, HMRC have pledged to reintroduce postponed accounting for duty and VAT. That will mean that VAT and duties due on imports from ‘third countries’ (which will include the European customs union if no deal is reached) can be settled on an entity’s VAT return instead of immediately at port.|