ABOUT THE AUTHOR: Mr Paul Rothschild is former CEO to Black Rock Asset Services and PLDD Platinum Luxury Design & Development. He acts as a consultant advisor to International Governments, Family Offices and Property Development and Management Companies. Paul is committed to helping businesses grow and navigate complex issues such as Brexit.
If ever there was a year that would go down in history as one of the most disruptive to UK businesses, 2020 would undoubtedly be one of them. A global pandemic, combined with the need for rapid organisational change caused by the UK’s departure from the EU, has destabilised many businesses. It’s also set 2021 up to be another potentially disruptive year – hopefully, with light at the end of the tunnel.
Many UK SMEs are still worrying about regulatory changes. Their top two concerns are:
- How their access to EU markets could be affected
- Whether or not to expect further increases to import and export costs
Given the uncertainty around the Brexit transition, what are the most proactive steps SMEs should take?
1. Examine the Facts
The first move should be to evaluate the potential impact of Brexit on your individual business. This might sound easier said than done, but it’s simply a matter of asking the right questions.
Ten Key Brexit Questions to Ask about Your Business
1. How does Brexit affect my business, and what can I do?
2. Are there preferential tariffs for some areas of my business that I could exploit?
3. Which Brexit trade deal rules cover my product origin, and do I need to resource and reprise?
4. Can I get the HMRC to give my business an Authorised Economic Operator (AEO) Status?
5. When importing from the EU, what changes affect me and is there a way to structure my business to benefit?
6. When exporting to the EU, what changes affect me, and can I structure my business to help?
7. Do I need to make any changes regarding products by way of Product Certifications or Conformity Markings?
8. What are the new rules of the EU country that I need to visit regularly in respect of Business Travel?
9. How will the changes affect the EU citizens that I employ?
10. As part of the Data Protection Act, the UK adopted GDPR from the EU; now that the transition period has ended, the protection requirements apply to all UK Businesses with any data flow to and from Europe. Have I correctly implemented GDPR into all my processes?
Once you’ve answered these questions to the best of your knowledge, it’s time for Step 2.
2. Keep an Eye on UK Trade Tariffs
As of 1st January, 2021, the UK Global Tariff applies to all of the goods that businesses import. That being said, there are exceptions to this rule in place.
The UK government has included a trade and tariff tool on their website, which offers information on the UK Tariff that SMEs can expect to pay – as well as commodity codes, duty, and VAT rates. Businesses should frequently check this page for tariff changes, which are expected in several sectors.
3. Register for an Economic Operator’s Registration and Identification Number
If your business is trading between the UK and the EU, you’ll need to register for EORI.
SMEs should be registered both in the UK and one of the 27 EU countries. The registration can be done anywhere in the EU. However, it’s preferable if it’s completed in the same country where you’ve registered for EU import VAT. Doing this will significantly reduce the risk of border delays.
Having an EORI registered is crucial in the wake of Brexit. It will:
- Simplify the customs process
- Help organisations avoid incurring extra costs
- Prevent undue delays.
The good news is that the application process for an EORI is very straightforward. It only takes around 15 minutes overall to complete on the UK Gov site.
4. Understand Brexit Implications on VAT
If you’re an SME hoping to navigate a post-Brexit Britain, you’ll need to understand the implications leaving the EU will have on VAT.
Of course, the party liable for VAT payments depends on the payment terms and incoterms of a shipment.
Simply put: businesses will be liable for duty and import VAT if they plan to export from the UK into the EU. However, if they deliver directly to customers, they’ll need to register for EU VAT.
Companies looking to trade with the EU should register for VAT in the country of clearance. If your company has an EU entity, registering with the relevant local authority is simple. If not, the registration will need to be carried out through a fiscal representative in the country of clearance.
If you’re importing or exporting to or from the UK, UK VAT registration will be required. This has been made fairly simple on the UK Gov website. Bear in mind, though, that the UK government has also imposed charges which affect who is responsible for paying UK import VAT.
This depends on the value of your goods:
Goods valued at or below £135
Any shipper selling goods valued at or below £135 into the UK is required to pay UK VAT on these shipments. This amount should be paid to HM Revenue and Customs at the point of sale.
Goods valued above £135
If any goods are sold into the UK valued above £135, then the importer is responsible for the payment of UK VAT. This can be quickly paid either through the customs declaration or postponed VAT accounting.
5. Familiarise yourself with Commercial Invoices
A commercial invoice itemises products that are being shipped to and from the EU. A description of the goods and their value must be included as the basis for customs declaration. These invoices help customs authorities determine the duties and taxes that are applicable – meaning they’re essential to the shipping process.
6. Go Paperless
Many websites (including Gov.uk) now offer paperless documentation . Submitting invoices and documentation online has become much more streamlined. And since all required documentation undergoes a clearance process before imported goods arrive at the border, electronic submission is your best bet.
7. Ask the Experts
Avoid relying on general information found on websites. Instead, head straight to a verified source.
For example: suppose you’re planning on doing regular business with a specific EU country. In that case, it will pay dividends to register with the UK Chamber of Commerce in that particular country. They’ll help guide you through procedures required in their county. Additionally, they can help facilitate introductions to appropriate people and companies that could further benefit your business.
Alternatively, you could appoint a top expert in the EU country you wish to deal with. They can advise you correctly on the best ways to navigate the system in their country.
A post-Brexit, post-Covid Britain will bring fresh demands and the need for many changes – especially for SMEs. However, these changes are simple to navigate and shouldn’t be cause for concern.
As long as you examine your business’s needs, identify the solutions and seek assistance when necessary, you should be able to keep on top of these changes!