Whatever your views on Brexit, it seems it is going to happen and preparing for all eventualities is just good business sense: if you haven’t started your preparations yet, you may end up losing out to competitors who have done their groundwork, says Angela Keery, Tax Director at BDO Northern Ireland.
The risk of a hard Brexit outcome is clearly increasing as the government is upping its preparedness and has been publishing contingency briefings on coping with a no-deal Brexit.
Businesses should be scenario planning for the potential Brexit outcomes, looking at where their purchases come from, and where their goods are sold to.
If your purchases and/or sales are outside the UK, you should have considered the potential Customs Tariffs, Supply Route, VAT, Import/Export Costs and admin costs that may be applicable post Brexit.
Whilst all of the above is considered scenario planning (until we know what Brexit will actually look like), there are some very practical steps you can be doing now to prepare for Brexit.
Retailers and manufacturers apply for AEO status now
If you don’t have it already, and you are eligible to apply for it (ie you trade outside the EU) you should consider applying for Authorised Economic Operator (AEO) accreditation as soon as possible, if possible – ideally before March 29th next year, in order to be prepared for a ‘hard BREXIT’ scenario.
AEO status opens the door to a range of business privileges. It lowers your risk profile as far as the authorities are concerned – minimising the risk of delays at the border. It also allows you to waive or reduce mandatory financial guarantees for suspended and deferred customs duty and import VAT as well as to qualify for other customs duty reliefs, such as Customs Warehousing and Inward Processing.
Origin of goods analysis
As well as comparing the potential Customs Duty cost of a no-deal Brexit, it is sensible to look at the other duty impacts of Brexit – even a new trade deal could create new costs and compliance requirements.
If the final Brexit reality is that the UK and EU enter into a Free Trade Agreement; understanding of the economic origin of goods may be key to determining if a UK business could benefit from zero tariffs at import.
Local VAT registrations
In many situations, it is not currently necessary for UK businesses to register for VAT in every EU country in which they sell goods: this may well change after Brexit.
After Brexit, UK businesses will have to fulfil the non-EU registration requirements. So, if you are already VAT registered within the EU, you will need to check that the local compliance requirements will not change. If they do change, you will have to reregister.
Establishing an EU presence
Many firms (in financial services and other regulated sectors) have already put plans in place to establish a local presence in EU markets but, if your business has not yet done so, it is not too late. At this stage, the acquisition of a local business might be the quickest option whilst and where regulatory rules allow it.
Group structure review
The next logical step is to look at the whole structure of your group to ensure it will still be fit for purpose after Brexit.
The UK will cease to benefit from the EU parent subsidiary directive, meaning that withholding taxes may be due on dividends and interest flaws between the UK and group members in the EU. It may be possible to restructure the group so that its subsidiaries in EU member states and income flows back to the UK continue to benefit for zero withholding taxes.
Contact Angela or another member of BDO’s dedicated Brexit team on 02890439009 to see how we can help you and your business get prepared.