Brexit will have a huge impact on commercial contracts, and how we import and export goods not only through the EU, but also to countries that the UK has negotiated trade deals with as a member of the EU. The UK has until the end of this year, when the transition period comes to an end, to form new trading arrangements with its trading partners. So far, the UK has signed 20 trade agreements that take effect from 1 January 2021. These agreements include the Eastern and Southern Africa trade block, Central America, and Israel. The full list can be seen here.
If a deal is not struck with the EU and other related countries, we will once again be facing a No Deal Brexit where the UK has to trade on World Trade Organisation terms. There are a lot of major deals to do in a matter of months. In the meantime, UK importers and exporters are left feeling uncertain about what the future holds.
To give your business the biggest chance to not only survive but also thrive post-Brexit, this guide will help you to prepare for the worst case scenario – a No Deal Brexit – while hoping for the best outcome.
Prepare for EU tariffs
If you trade with countries outside of the EU, you will be familiar with tariffs. If you only do business within the EU you will not be, as the customs union and the single market allows you to move goods from, for example, France to Wales as easily as you would transport them from London to Cardiff.
As things stand, the UK will leave the customs union and the single market at the end of the transition period, then all goods imported to the UK will be subject to border tax or tariffs. The new UK Global Tariff, which will replace the current Common External Tariff, will apply to all imports from 1 January 2021, unless they are from a country that we have a trade or other agreement with. You can check what these tariffs will be here.
If the UK leaves the EU without a deal, there will be new tariffs on many goods and services that are exported from the UK to the EU too. Even if the UK leaves the EU with a deal, there may still be tariffs and VAT on some traded items. Those goods that we export to the rest of the world that are currently subject to EU-negotiated tariffs will be subject to new duty rules too, many of which have yet to be agreed.
Be ready for possible new VAT obligations
The preferential VAT agreements that the UK has with some European countries may be lost as part of a new EU trade deal or if the UK leaves the EU without a deal. This means that you may have to register for VAT and follow additional VAT processes in some EU countries that you send goods to. An expert Brexit accountant should be able to assist you with this.
Think about hiring a customs agent
If, as seems likely, Brexit involves filling out customs declarations, look into hiring a customs agent to handle all the documentation involved in getting goods across borders. This additional cost could quickly pay for itself in terms of the time and effort it will save you.
Audit your procurement and supply chain
“Brexit will have an immediate and wide impact on procurement,” explains Paul Hodges, chairman of impartial business advice service Ready for Brexit. “The fact that the government is having to recruit 5,0000 new customs agents confirms that there will be a vast amount of new rules and paperwork. HMRC has calculated that 400 million new Customs Declarations will be required each year. This highlights the urgent need to begin preparations today, given that the new rules are expected to be applied from 1 January 2021.”
You don’t want your goods or services held up because a part of your procurement or supply chain hasn’t prepared for Brexit. Now is the time to talk to each link in your supply chain to find out what preparations they have made for Brexit. Do they expect any delays in supplies and if so, will they be stockpiling, so as not to hold up deliveries? Will they be passing on price increases as a result of tariffs? If you are unsure about any stage in your supply and procurement process, you have time to try out new suppliers.
Consider opening a base in the EU
Hundreds of large and small UK-based companies have already opened sister companies in the EU to help reduce the red tape and expense associated with Brexit. Currently, many companies manufacture in Europe, and then, for example, import the goods into the UK for assembly and packaging and then export them back to Europe or further afield. Creating an EU affiliate company, which does all this within the EU after Brexit, means that you will only pay tariffs on goods coming into the UK for the UK market. You will also still be governed by EU regulations and reduce much of the hassle that will come with complying with the new UK parallel regulations.
Prepare for border delays
It may only be temporary until the new system is up and running and everyone knows what they are doing, but it is likely that for at least the first few months of next year there will be delays at the borders between the UK and the EU. To ensure that this causes your business minimal disruption, look to stockpile goods, either in the UK or the EU, and if necessary, obtain additional storage space to hold it. Ensure that you have the cash flow to cover these extra costs too. Speak to your bank or a reputable business lender ahead of time if additional funds may be required.
Look to new markets
The UK government’s Department for International Trade is currently actively encouraging exporters to look to markets outside of the EU. It has set up a dedicated website to help exporters find new opportunities. It’s also worth importers looking to see if they can buy their goods from markets outside of the EU with the same or improved costs, quality and timings.
Everyone trading goods and services within and via Europe is asking how will Brexit affect imports and exports? The frustrating answer is until a deal is done, or a No Deal Brexit is confirmed there are a lot of variables and you need to prepare for all of them. Harper James’ commercial team is here to help ensure that your business is legally prepared for every aspect of Brexit.