Is your business prepared for a no deal Brexit?
Posted on 28th October 2019 at 16:03
Britain’s anticipated withdrawal from the EU on 31 October may no longer appear to be likely but if it happens it means that businesses across the UK need to make sure that they are properly prepared. The possibility of a no-deal Brexit does hopefully look less likely, but it is still crucial for company directors to know what a no-deal exit means for them.
In this article we will discuss how to prepare your business for Brexit.
Customs and indirect tax such as VAT
Although customs and VAT across EU borders might not have been of much concern to businesses until now, it is important to note a no-deal Brexit will immediately introduce new administrative requirements for trading in Europe, and potentially new cash flow requirements.
For example, businesses will need to understand how to complete and submit customs declaration forms. You will need to agree who within your business will complete the forms and ensure they have sufficient training.
Your business will need to apply for an EORI number, if the government has not auto-enrolled your business – and if you haven’t yet received your auto-enrolled EORI number – then you should make an application anyway just in case.
You should speak to logistics providers about clearance arrangements and consider registering for Transitional Simplified Procedures.
You should also consider if your business will benefit from using a VAT Deferment Account or obtaining a Comprehensive Customs Guarantee to help with cash flow when paying customs or import VAT.
Ensuring your supply chain keeps working
You also need to ensure that your business has the stock it needs and is able to continue to send goods out. This will require particular examination.
Start by mapping your critical inbound and outbound supply chains to understand which flows are vulnerable to disruption from border delays. Include in this critical goods not for resale, such as packaging and maintenance parts.
You should review all your contracts with non-UK suppliers and customers to ensure they include Incoterms (international commercial terms for trade in goods) to identify which party is responsible for clearance obligations.
And you should talk to suppliers and customers about payment terms and service level agreements, such as delivery timetables, to try to build in some flexibility.
Work and the movement of people
A business is nothing without its people. Therefore you will also have to ensure your workers still have the legal right to work within the UK, and also ensure any of your workers overseas have the right to work in those countries, as well.
Critical to this is reviewing the UK government’s advice on Settled Status, including the employers’ toolkit and right to work tool along with guidance on EU Leave to Remain.
It isn’t just you who needs to know this information. Ensure the key information is shared with your employees, you could put this on your company’s website for example.
If you do not have a HR department within the business, you might also want to consider nominating a key point of contact to support with people-related queries from employees.
Members of some regulated industries such as financial services and pharmaceuticals – will need to ensure they’re still regulated for the markets in which they work. This includes the UK, of course, following the removal of EU regulations.
Start by identifying which parts of your business are subject to EU regulation. Review the relevant regulation to understand if you will need additional authorisations to continue your activities in the EU, for example where activities can only be undertaken by an EU/EEA established business.
Review what personal data your business holds, who you share the data with, and whether you are sharing personal data cross-border, including with any third-party service providers.
Finance and money
A lot will change in the world of finance and tax following a no-deal Brexit. Apart from the fact that costs and cash flow changes associated with Brexit may impact working capital, the UK will no longer be subject to EU Withholding Tax treaties, for example.
You should model the potential impact of a no-deal Brexit scenario on your financial forecasts, including the cash flow impact of additional duty costs.
Make sure that you speak to lenders about access to funding and discuss payment terms with suppliers.
If the business relies on EU directives to reduce withholding taxes to nil on payments of interest, royalties or dividends, identify whether there will be an increased tax cost.
Just think how much of the content of your legal contracts is built on EU law, and how many of your products rely on EU intellectual property laws?
You should audit your critical cross-border commercial contracts and consider whether to renegotiate terms to seek further contractual protection against risk and cost of potential Brexit disruption.
Consider the basic definitions in contracts to check that they remain valid (for example, that geographical territory covered does not assume the UK is still in the EU).
You should review any EU intellectual property and .eu domains to ensure continuity post-Brexit.
It’s also necessary to review guidance on how cross-border business operations and European specific corporate entities would be affected if there is a no-deal Brexit.
So, is your business prepared?
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