Brexit: a survival guide

‘No-deal': Prepare for major trading changes

Leaving the Customs Union — impact on imports and exports

Importers and exporters alike will be required to complete customs declarations. EU imports will face customs, VAT and regulatory compliance inspections.

UK exporters will be liable to pay ‘common external tariffs’ to export goods into the Customs Union (CU) — an irrecoverable cost. The tariffs would initially be at the World Trade Organization (WTO) Most Favoured Nation (MFN) rates — as opposed to the current zero customs duty.

Businesses importing goods into the UK will equally pay MFN standard rates — unless the UK decides to drop tariffs. However, if the tariffs are dropped, it will be uniformly for both EU and non-EU imports.

Leaving the EU VAT regime

The EU VAT regime simplifies VAT treatment (e.g. reporting and recovery). VAT incurred in the EU is currently covered via the HMRC reclaims website for UK businesses. Post-Brexit, UK companies without EU registrations will automatically lose access to the online recovery facility.

In the no-deal scenario, UK businesses will be required to VAT register in EU27 territories on a country-by-country basis. Additionally, some of the EU27 states require non-EU companies to appoint fiscal representatives when registering VAT in their countries.

Leaving the Single Market

For the first time, UK companies that import goods into the UK will be charged a 20% import tax, recoverable through a UK VAT return.

The SM allows the free trade and movement of goods, services, capital and people across its borders.

Once the UK leaves the SM, businesses will no longer be constrained to follow EU regulations and maintain EU standards for goods and services. However, leaving the SM will limit trade within the European market: licencing and quota limits will be imposed and delays should be expected through additional border controls and inspections.

Could a no-deal Brexit be prevented?

A no-deal Brexit can still be prevented. After failing three times to get her proposed Withdrawal Agreements accepted by the UK parliament, Theresa May and the EU have agreed a further delay to Brexit until 31 October 2019.

This date could be earlier if a withdrawal agreement is accepted by MPs. The UK must now take part in European elections on 23 May — if it did not the UK would have to leave the EU on 1 June without a deal.

If the leaders can find a compromise before the end of October, there could be multiple outcomes: a full renegotiation, a referendum, Article 50 is revoked, a general election takes place, and of course, there remains the threat of no-deal.

In the case of a no-deal Brexit, the UK will leave the EU with no negotiated terms — in a second everything will change.

Tips: how can businesses reduce trade friction following a no-deal Brexit?

A no-deal Brexit is increasingly probable, so it’s essential for businesses to start to make preparations to reduce inevitable trade frictions. Here are our tips to help plan ahead.

Customs

Understand new customs declarations procedures

• Apply for an Economic Operator Registration and Identification Number (EORI) via HMRC. This number identifies your company and is required on customs paperwork.
• Get familiar with the Single Administrative Documents (SAD) form C88. This will be completed for imports and exports and contains goods information such as commodity code, import value and VAT, and the customs procedure.

Look into grants for Brexit customs training and IT upgrades

Certain UK businesses qualify to get funding for training and IT improvements if they complete customs declarations. There are two grants to help prepare for post-Brexit declarations processes:

• Training that helps your employees to complete customs declarations and processes (limited to £750 per employee)
• IT improvements to help your business complete customs declarations more efficiently (limited to £200,000 per company)

Check import duty reliefs to reduce or suspend payments

Certain goods processing procedures qualify for reliefs from customs fees:

• HMRC-approved customs warehouses store goods that are released into free circulation without incurring import duties or VAT;
• Inward processing - when goods are brought into the UK to be finished and re-exported to another country they qualify for duty relief;
• Temporary duty suspensions are available exported raw materials, components and semi-finished products from elsewhere in the EU;
• Temporary Admission relief covers samples, professional equipment or items for auction, exhibition or demonstration.

Apply for Authorised Economic Operator (AEO) and Customs Freight Simplified Procedure (CFSP) statuses

• AEO status means simplified customs procedures and, in certain cases, the right to ‘fast-track’ your exports in certain customs, and reduces guarantee payments.
• CFSP status means the customs clearance for goods entering the UK is changed to a monthly declaration report, submitted to the HMRC. This means simplified import entry procedures and is close to the pre-Brexit movement of goods.

You can obtain these status’ via the HMRC. To be CFSP certified, you’ll need to provide a monetary bond (reduced if you have AEO status).

Obtain a Customs Comprehensive Guarantee

The HMRC’s Customs Comprehensive Guarantee helps to cover potential duties and VAT liabilities on imports, as well as providing: Temporary Admissions, Inward Processing Relief, Temporary Storage, Customs Freight Simplified Procedure and Customs Warehousing.

VAT

Get familiar with VAT registration obligations

• For e-commerce goods, e-retailers will no longer be able to process VAT incurred the EU27 via their UK return. Post-Brexit, sellers are required to register in each country to pay VAT or cease sales. Sellers could look into moving and holding stock in another EU27 state to simplify this process. Sellers would be required to VAT register in the chosen country but would be re-entitled to the distance selling threshold for sales to other EU27 countries.
• Businesses selling B2C digital services currently report EU sales via the Mini One-Stop-Shop (MOSS). Following a no-deal Brexit, these companies should register for the VAT MOSS non-Union scheme in an EU Member State, to complete a single MOSS registration. Choosing Ireland could simplify this process, thanks to the shared language. Digital sales to UK consumers will be completed through UK VAT returns.

Appoint VAT fiscal representatives

19 of 27 states require non-EU companies to appoint fiscal representatives when registering VAT in their countries. Liable for their clients’ missing VAT, fiscal representatives typically request a bank guarantee or deposit (roughly amounting to a quarter of the anticipated annual VAT payments.

Reclaim incurred EU VAT

UK companies currently recover EU VAT online via the Electronic VAT Refund (EVR) 8th Directive. Post-Brexit, this will switch to the considerably longer paper-based ‘13th Directive’ claim system, used by non-EU businesses — companies should ensure to track paper receipts.

If you want to learn more about cross-border e-commerce, click the link below:

Guide to cross-border e-commerce

Sources: Avalara, HMRC, BBC, Gov.uk, European Commission, World Trade Organization.

Picture: Public Domain.

‘No-deal’: Prepare for major trading changes

Leaving the Customs Union — impact on imports and exports

Leaving the EU VAT regime

Leaving the Single Market

Could a no-deal Brexit be prevented?

Tips: how can businesses reduce trade friction following a no-deal Brexit?

Customs

Understand new customs declarations procedures