Now that the Brexit transition period is over, there are new rules for businesses which buy and sell goods and services across the UK and GB border. It’s understandable if you’ve zoned out of the Brexit updates by now, having been a drawn out process since 2016.
As a business, you might not even realise Brexit will affect you, especially if you only have minimal dealings with EU customers or suppliers.
Which businesses does Brexit affect?
In short, the end of the transition period affects any business with activities which cross the UK border (or the border between Northern Ireland and GB).
Remember the introduction of GDPR? Organisations all round the world had to ensure compliance when handling the personal data of EU citizens. Even a small eCommerce store on Etsy processes personal data from the EU if that’s where you’re shipping to. There are also implications for VAT, customs and excise, and professions belonging to regulatory bodies.
When do the changes come into effect?
The UK’s transition period for leaving the EU officially ended on the 31st December 2020, with most of the changes taking effect from 1st January 2021 onwards.
In this guide, we summarise some of the key considerations. It’s also worth putting together your own Brexit action plan. It will help you stay on top of things as deals and decisions progress.
- Sign up to newsletters and blogs from your professional service providers. Accountants, lawyers and insurance providers will likely be keeping their ear close to the ground.
- Bookmark key pages for the Brexit transition on the gov.UK website. Check back regularly for updates!
- Register with professional bodies and representative organisations for your industry. For example, the Information Commissioner’s Office to stay up-to-date with GDPR.
- Attend webinars and sessions with your local authority.
- Sign up for updates from the Chamber of Commerce in your area.
What will change for businesses after the transition period?
If you haven’t already conducted a Brexit review within your business, it’s not too late! Use the list below as a starting point.
The end of the Brexit transition period will affect businesses and individuals:
- Buying or selling products or services to and from the EU, including digital sales.
- Who travel to the EU for work.
- That employ EU nationals.
- Who have a UK base and work with data from the European Economic Area.
- Who offer professional services, especially if this requires particular qualifications or accreditation.
Selling products and services in the EU post-Brexit
Now that the UK is now longer a member of the EU, goods and services which cross the border are now treated the same as any other import or export. The government advises businesses trading with EU countries to use the same import and export processes they use with countries that don’t have a UK trading agreement.
This means you’ll need to place customs or export declarations on all shipments you send outside the UK.
The changes also affect some processes for VAT – this is a complex subject, but in brief:
- You don’t need to charge UK VAT on goods that you export to EU businesses, because if the goods aren’t for use in the UK, then UK VAT doesn’t apply. Instead, you must make sure that the business is allowed to act as an importer, and that the customs invoice shows what the goods are worth, so that they’re charged import VAT correctly in their country.
- If you sell from the UK to EU customers, you’ll either need to move your goods to an EU country and register for VAT there, or register for VAT in each country you sell to.
- If you’re UK VAT registered and import goods in to the UK, you may be able to use postponed VAT accounting. This means that you can account for import VAT and recover it on the same VAT return, rather than paying it at the UK border.
The introduction of postponed accounting
The government are introducing Postponed VAT Accounting (PVA) from 1st January 2021. The aim of doing so is to help UK businesses deal with any possible impact on their cash flow caused by import VAT now being charged on imports from the EU.
Businesses can use postponed accounting if:
- They’re registered for VAT in the UK.
- They import goods with a value higher than £135 to use in their business.
- The customs declaration shows that you’ll be using postponed accounting, and includes your VAT registration number, and EORI number.
Categories and tariffs
To help you plan ahead, use the UK government’s Trade Tariff calculator and input your current goods. This will help you to understand the category your items fall under, and how this affects duty and VAT charges.
It’s essential to understand the tariffs that affect the goods you work with. Some items face much higher taxes on import. It may be valuable to research new suppliers – you may save your business some money!
If you’re a service provider and you offer a digital service, as many businesses now do due to COVID-19, you’ll need to know about changes to the way you pay VAT.
This is because in 2021, the UK’s exit from the EU will mean the end of VAT MOSS (Mini One Stop Shop) for reporting and paying VAT. Along with the end of MOSS, the €10,000 VAT threshold will end for digital services.
It’s worth consulting with your accountant how things will change if you sell digital services to the EU.
If you work in the EU post-Brexit
If you sometimes conduct business within the EU, you’ll need a work permit or visa when you travel there. This is particularly important to note if your business has clients or premises in the EU.
The new regulations affect business activities in the EU such as meetings, conferences, providing services, or touring for art or music.
You’ll need to know what the entry and work requirements are for each EU country that you work in. Some countries have different depending on how long you’re staying there.
If your employees regularly travel to Europe for work, it may also be your responsibility to help them secure the correct documents.
Anyone who works in the EU and earns while they are there will also need to inform HMRC, so don’t get caught out!
Employing EU nationals post-Brexit
Until June 2021, if you employ an EU national you’ll still need to verify their right to work in the UK using the current regulations. This may include verifying their passport, immigration documents, or using the online right to work checking service.
Legislation may change in this regard in 2021, but you must not discriminate against employees who are EU citizens.
Make sure you understand the rules – there are fines for employers who get it wrong!
Working with personal data from the EU after Brexit
Many businesses will remember the huge administrative changes that came with implementing GDPR. Although the UK is unlikely to abandon data protection, there may be changes to the way that data moves between the UK and the EU.
If you deal with personal data in both the UK and the EU, sign up with the ICO for the latest advice.
Ensuring qualifications are valid for services in the EU
If you provide services to businesses or individuals in the EU, you’ll need to ensure your qualifications and and professional accreditation are recognised in the countries you operate in.
This is particularly relevant to those who provide professional services, such as lawyers, accountants and medical practitioners. In the coming months, UK regulators will need to work to recognise EU equivalent qualifications, and vice versa.
If you have any doubts about how this will affect your right to legally provide your service, speak to the awarding body for your qualification.
How will Brexit affect your business in 2021? We’d love to hear your thoughts. Leave a comment below or connect with us on social media to join in the conversation.