With just three months to go until the transition period ends, businesses have little time left to get ready for the new trading arrangement between the European Union (EU) and the United Kingdom (UK).
COVID-19 and the uncertainty of ongoing negotiations about the future EU/UK relationship are complicating matters even further. The most likely outcome appears to be a ‘no-deal Brexit’ which may see the UK trade with the EU under World Trade Organisation (WTO) rules. Against this background, what can businesses do now to prepare?
The biggest change for all businesses will be that the UK is treated as a ‘third country’ by the EU from 1 January 2021. The exact steps a business needs to take depend on what type of trade you do with the UK. Below we detail a range of scenarios for different types of businesses.
If your business does not follow one of the scenarios outlined here, you must get professional advice as soon as possible.
Book a call with one of RMB’s Brexit specialists today! We will answer your questions quickly and comprehensively, so your business is Brexit ready!
EU businesses selling to UK businesses
Affects any business that sells to another company across the EU/UK border. Examples include heavy industry and distributors.
B2B transactions will no longer be classed as intracommunity movements which has implications for the reverse charging of VAT. Instead, these transactions will be classed as imports and exports between the EU and UK. VAT and duties will need to be paid on imports. B2B businesses who want to keep trading after 1 January 2021 must:
- Have an EU VAT number to take advantage of simplification rules (such as triangular operations)
- Obtain an EORI number in the EU and/or UK
- Register in the country where your goods are destined if there is no reverse charge rule for the local supply of goods by non-residents. This is the case in Germany and the UK.
- Appoint an accredited customs agent or broker.
EU businesses selling directly to UK consumers
Affects any business that sells direct to a consumer across the EU/UK border. Examples include distance sellers, retailers, trades people, and B2C shops.
Businesses selling directly to consumers will no longer benefit from the distance selling regime. Any goods sent between the EU and UK will need to be imported before they can be sold. That will mean that more companies need to obtain VAT numbers in the countries which import their goods.
Individual packages with a value above £135 (approximately €150) may be subject to import duty. Business who want to continue selling directly to consumers should:
- Determine who should pay the duties and VAT on import. If the seller wants to take care of that, they will need to register for VAT in the country of import.
- Ask for an UK EORI number to be able to import goods in the UK (or vice versa)
- Keep in mind that once the goods are in the EU, the distance selling regime applies to sales within the EU. This means that potentially, however, businesses that use an EU country as a hub to supply the rest of the common market will need to register in other EU countries if they pass the threshold for distance selling.
You are an EU business registered for VAT in the UK
Affects any business which has a local warehouse in the UK or EU and trades across the EU/UK border.
If you have goods or a warehouse in the EU and want to ship goods to a third country or the UK (or vice versa), you will no longer be able to be the exporter of record. This applies even if you are VAT registered in the EU as a UK company. Businesses in this situation need to appoint:
- A fiscal representative
- A representative who agrees to be the exporter of record.
You are an EU business working with UK suppliers
Affects any business that works with a UK supplier (or vice versa). For example, a local bar or café which buys beer or biscuits across the EU/UK border.
UK companies which rely on suppliers in the EU (or vice versa) will need to agree new rules that cover issues such insurance and responsibility. Another important consideration is who will be designated as the importer. This will affect who pays VAT and customs duties on the imports.
This change will have significant consequences on cash flow, costs, and margins. All contracts should be reviewed as soon as possible and renegotiated where necessary.
RMB can check the situation with your suppliers and create a plan for both sides of the relationship. Our goal is to ensure that the administrative burden is as light as possible for all businesses involved.
A free RMB check-up will help you ensure your business is fully Brexit ready.