Brexit: Where are we now and what’s ahead?

Over the last few months much of the attention has been focused on the Coronavirus pandemic and the unfolding lockdown situation. These times have been unprecedented and have presented huge challenges and change for businesses across the UK.

Even though national and international health issues have taken priority in the past few months, the Brexit process has still been ticking along in the background, leading us to reflect on where we are now and what lies ahead when it comes to our future trading relationship with the EU.

Where are we now?

• On January 31st 2020 the UK left the EU
• The UK had until the 30th June 2020 to request an extension to the transitional period which ends on 31st December 2020
• The Government has not requested an extension, meaning that the transitional period will end on 31 December 2020 , irrespective of whether a trade deal is agreed or not.

What has changed since January?

Essentially, not much. While we’re in the transitional period, the UK remains in both the EU customs union and single market, meaning that trade with the EU has not changed.

That said, the UK has left the European Parliament and European Commission. From a political perspective, this means that the UK no longer has voting rights in Europe.

Still to come…

Looking ahead, there’s still a lot of uncertainty when it comes to a trade deal. The trade negotiations are due to close in late November, and where a deal is agreed and ratified the new relationship between the UK and the European Union should commence on 1 January 2021.

Deal or no deal?

There is a good chance that a trade deal will not be agreed or ratified in time, which essentially means that a no-deal Brexit is still on the table. Equally it is possible that a limited deal could be agreed in time, with a more comprehensive agreement to be fleshed out over the coming years.

In the absence of a deal, it is likely that we would revert to WTO rules when trading with Europe in the future, which could present significant changes and challenges for businesses who regularly export and import goods from the EU.

Border controls could also be significantly impacted leading to delays at point of entry and increased administrative burdens from as early as 1 January 2021.

What should business owners be doing now?

The clock is ticking towards the end of the transitional period and if you’ve not already begun, now is the time to plan for a no-deal (or limited deal) Brexit.

From a VAT perspective there are some key considerations that you and your business should be keeping in mind:

• Your supply chain: Knowing your supply chain is crucial. Where are your goods coming in from and where are your suppliers based? Where do you ship to? And do you have cross-border operations that had never really been an issue before this? These are all questions you will need to consider when planning ahead for the coming months.

• Border control: As previously mentioned, border control will be impacted if there is a no-deal Brexit. This could result in delays when it comes to getting goods cleared at the border. Goods which were previously brought in from the EU relatively hassle free may be subject to more robust customs checks and Just-In-Time supply chains may suffer as a result.

• Import duties: Looking ahead, import duties might come into play. Although we don’t know what the tariffs may look like as of yet, a good indicator of the level of the UK Global Tariffs can be found on the Government’s website. Unfortunately, duties can’t be reclaimed and will form a cost, meaning you may suffer increased purchase. This will definitely need to factored into your budgets and taken into account when you are planning ahead. Check your contracts – what is your exposure? How is your risk managed? Who bears the additional costs?

• Import VAT: Import VAT will become payable on all goods brought into the UK from the EU and will continue to be due on goods from the rest of the world. Currently it looks like the UK government will implement postponed accounting for import VAT, which should allow businesses to notionally account for the import VAT through their VAT returns in a similar way as acquisition VAT is currently accounted for to HMRC. HMRC has recently released guidance in relation to importing and exporting goods from 1 January 2021. The guidance can be found here.

We’re here to support you

Preparing for a no-deal Brexit can seem like an enormous task, and the chances are that coronavirus will have affected your planning in one way or another. We’re on hand to support you, get in touch to see how we can advise you – whatever the final Brexit outcome may be.