Ten Tips for Brexit Proofing your business
1. Ensure that your staff who are EU/EEA/Swiss nationals have registered with the Home Office for the settlement scheme to protect their right to live and work in the UK. They will need to be living in the UK before the Brexit date to apply. If they do not apply, then they will lose their right to work in your business and you could be liable for penalties for illegally employing them.
2. Apply for an EORI number from HMRC if you plan to trade with the EU or other countries after Brexit. EORI means Economic Operator Registration and Identification number. You will also need to decide whether you will complete customs declaration in-house or will outsource this to a customs agent/freight forwarder. These declarations can be complex and require specialised software to complete them on-line.
3. Understand how customs duties (tariffs) on imports and exports will affect your business, especially pricing and purchasing decisions Post Brexit, the UK will no longer benefit from the EU’s trade deals and tariff rates and will rely either on negotiated trade deals (preferential tariffs) or the World Trade Organization (WTO) rules (most-favoured nation tariffs). These are complex rules based on:
(i) The type of goods (their commodity code)
(ii) The country into which they are being imported into
(iii) The country from which they have originated
Your staff will need to understand the different commodity codes of your major imports and exports and be aware of the tariff rates that would apply. You will also need to decide if ‘binding tariff information’ should be applied for from HMRC.
4. Decide whether to register for simplified import procedures which will allow your business to defer import VAT and customs duty on imports, using a duty deferment account. This avoids your business having to account for these immediately at port. You will also need to take advice on whether to apply “transitional simplified procedures” or “customs freight simplified procedures” to your imports.
5. Deal with VAT changes
(i) The "mini one stop shop" (MOSS) allows businesses that sell digital services to consumers in EU member states to report and pay VAT via a single return and payment. UK businesses can continue to use the system after Brexit by registering in an EU member state. They will not be able to do this until after Brexit.
(ii) UK businesses will lose access to the EU VAT refunds system after Brexit so claims should be made before this date. As long as a reclaim is filed before Brexit, it will be processed.
6. Review your contracts both standard as well as those with existing EU customers and suppliers to ensure that they clarify the terms for trading across EU borders. You should bear in mind that It may be more difficult to enforce a judgment by the English courts in some EU member states after Brexit.
7. Ensure you remain GDPR compliant. If there is a "no deal" Brexit the EU GDPR will no longer be law in the UK. However, as the UK government intends to write the GDPR into UK law, in practice GDPR will continue to apply. After Brexit, the UK will be a "third country" until the EU makes an adequacy decision regarding the UK. Until then, the transfer of personal data from the EEA to the UK will only be allowed if ‘appropriate safeguards’ are in place. Transfers of personal data to the EU/ EEA from the UK will not be affected.
8. Disclose Brexit issues in corporate reporting. The directors’ report and strategic report in the financial statements as well as webpage reports are an opportunity to communicate how the board is taking account of issues raised by Brexit.
9. Remain AML Compliant. The EU has passed the Fifth Anti Money Laundering Directive (EU) 2018/843 (MLD5) and the Sixth Anti Money Laundering Directive (EU) 2018/1673 (MLD6), though the deadlines for implementing them have not yet arrived. The UK government will almost certainly implement these, irrespective of Brexit due to undertakings made to the EU.
10. Changes to international taxation may impact upon cash flow.
Deduction of tax from interest and royalties
The EU Interest and Royalties Directive (IRD) allows EU companies to pay certain interest and royalties within the EU without needing to deduct tax from them. Post Brexit, the IRD will no longer apply, and the provisions of the relevant bi-lateral double taxation avoidance agreement (DTA) will apply. This means that you may receive lower interest and royalty payments as a result of foreign withholding tax (WHT). You will need to claim credit for this foreign tax suffered in your annual tax return.
Equally you may need to deduct WHT from interest and royalty payments made to EU resident recipients.
Deduction of tax from dividends
The EU Parent Subsidiary Directive removes WHT on dividends paid by a company of a member state (subsidiary) to an associated company of another member state (parent). After Brexit this will no longer apply and the taxation of dividends paid to the UK will be regulated by the relevant DTA. As the UK does not impose WHT on dividends, there will be no change on outward payments.