How accountants and businesses should prepare for Britain leaving the EU

The UK is scheduled to leave the EU on 31 October 2019.  Afterwards, there will be significant changes to business and financial processes. Finance professionals need to understand how these will impact their own business processes, as well as those of clients.

Even small businesses that export or import to the EU will be affected. So will those employing EU workers, or sending workers to visit EU states. There are also potential implications for receiving data from EU trading partners.

Customs processes

Once we leave the EU, we will leave the Customs Union and so import and export processes will apply. See HMRC’s Brexit page.

EORI number

  • In order to move goods in or out of the UK, businesses will need a UK EORI number (Economic Operator Registration and Identification). This should be prefixed with the letters GB. HMRC has automatically enrolled companies that are VAT registered, and have traded with Europe. Firms below the VAT threshold need to apply online. The process is simple and takes around three days – more information.
  • Action: check if your organisation needs an EORI number.
  • In order for an organisation in the EU to receive goods from a UK supplier, they will also need an EU EORI number more information.
  • Action: check trading partners have an EORI number.
  • Businesses that export and import across the Irish border and not with other parts of the EU will not need an EORI number.

Customs declarations

Streamlining customs processes

  • To reduce the amount of information given at the border, importers can apply to the Transitional Simplified Procedures (TSP) scheme
     – more information or video explainer. HMRC has just auto-enrolled 95,000 firms. This should allow most traders up to six months to pay import duties and submit customs declarations.
  • Companies that are dependent on moving move goods rapidly through borders should investigate the Common Transit Convention scheme. This is a permanent scheme whose benefits include removing the need for customs declarations at every border crossing and allowing duties to be paid once goods reach their destination. See video explainer.

Tax and duty

  • Organisations importing from the EU should check what tariffs apply, and whether VAT must be accounted for.
  • Action: check the rate of tax and duty for the goods.

Deferment account

  • Organisations that regularly import can apply for deferment account, which allows payment of customs charges in a single monthly payment on the fifteenth day of the month following the month of import. Having a deferment account can help a business ensure high-value shipments are cleared quickly and simply at Customs.

Assigning responsibility

  • Consider making a person in the business responsible for leading customs planning. In general, staff need to understand the processes involved in shipping goods around the EU now, including whether any standards or licenses apply to the items.
  • Government is making £16 million available to help business train staff in making customs declarations.

Ireland customs processes

HMRC has published guidance on how excise goods will be moved to and from Ireland in a no-deal Brexit.

HMRC Helpline

HMRC has a helpline for queries, including customs declarations and procedures, duties and tariffs.

0300 3301 331

VAT

  • After Britain leaves the EU, businesses will have to apply VAT to trading with EU countries in the same way as when trading with non-EU countries. In the long term, the UK will be able to set it’s own VAT rates. But the UK’s short-term policy is to stay as close to the current position as possible – more information.

Postponed accounting

  • HMRC has announced a postponed accounting scheme for VAT on goods brought into the UK. This will avoid adverse effects on cash-flow. It means that UK VAT-registered businesses importing goods to the UK will be able to account for import VAT on their VAT return, rather than paying import VAT on or soon after the time that the goods arrive at the UK border. This will apply both to imports from the EU and non-EU countries.

Triangulation will end

  • The process of simplifying cross-border VAT accounting by ‘triangulation’ will no longer apply. This presently allows a British business to order goods in France and have them delivered to a customer in Italy without a need to be registered for VAT in either of those countries or charging VAT. After Britain leaves the EU, this benefit will no longer be available, and the business will need to register in either Italy or France. 

VAT registration in the EU

  • Businesses that are currently registered for VAT in other EU countries should be aware that many countries have different registration requirements for EU and non-EU businesses.
  • Current EU rules would mean that UK businesses will continue to be required to register for VAT in the EU member states where sales are made in order to account for the VAT due in those countries.

Ireland and VAT

  • The Irish Government will need to clarify arrangements for a no-deal exit with the European Commission and EU member states. HMRC says companies trading across the land border in Ireland should consider taking advice from the Irish government about the best way to prepare. Find out more here.

Distance selling

  • Mail order exports to private customers in the EU countries are currently covered by the EU’s distance selling regime. After exit, this scheme would cease to apply to the UK. Sales by UK operators would be zero-rated by HMRC. However, there could be charges for VAT and duty on the EU side.

Postal imports worth £135 or less

  • While most VAT payments will be deferred, this does not include goods imported as postage parcels and valued at £135 or less.
  • Here, the importer will pay the import VAT upfront and the overseas seller of the goods will have to account for the import VAT. The VAT should then be reclaimed against the sales invoice on the next VAT Return.

VAT on digital services

Businesses that sell digital products to consumers in the EU will have to get to grips with VAT changes after we leave the EU. The Mini One Stop Shop (MOSS) scheme was designed to simplify accounting for VAT for  such businesses. However, the UK MOSS scheme will close after we leave the EU. In future, businesses will need to either:

  • register for VAT MOSS in any EU member state, or
  • register VAT in each EU member state where they sell digital services to consumers.

VAT Information

Import guidance VAT under no-deal

Financial reporting

  • The UK’s corporate reporting regime will remain largely unchanged after the UK exits the European Union. The Government has published guidance on accounting practices in the event of a no-deal Brexit, which can be found here.

Company Law

  • UK businesses with a branch operating in the EU will become a third country business in the event of no-deal, and so will need to comply with the laws in those countries.

Accounts

  • Accounts will need to be prepared using ‘UK adopted IAS’ instead of ‘EU adopted IAS’ for financial years beginning after the UK leaves the EU. Initially, standards will be the same, but may later diverge – more information.

Audit

  • UK companies will need to appoint a UK registered audit firm. An individual UK registered auditor will need to sign the audit report on behalf of the firm.
  • Some rules relating to approving individuals and firms for registration as auditors will change. Find out more about auditing after Brexit.

Disclosures

  • The Financial Reporting Council is encouraging companies to be specific about the threats they face from leaving the EU. 
  • Recent advice to finance directors and audit chiefs says challenges should be disclosed, along with details of actions taken or planned.

People and travel

  • Workforce
  • Qualifications
  • EU workers’ right to stay
  • Travel
  • Recruitment

Workforce

  • Businesses will remain able to hire staff from EU countries after the UK leaves the Union.
  • The UK Government will establish a new skills-based immigration system by 2021. Until then, EU/EEA/Swiss citizens arriving in the UK after EU Exit will be able to work or study for up to 3 months without a visa.
  • Those who want to stay in the UK beyond the initial 3-month visa free period, will be able to apply for EU Temporary Leave to Remain (TLR) while they are in the UK to remain for up to 36 additional months.  This period will not be extendable. Those who want to remain permanently would have to apply under the new skills-based immigration system.
  • Employers will need to continue to conduct the same Right to Work checks that they currently do, using EU/EEA/Swiss citizens’ passport or national identity card, until 2021.

Qualifications

  • Where UK nationals have already been recognised by an EU country as holding valid professional qualifications this will remain valid after the UK leaves the EU.

EU workers’ right to stay

  • EU nationals and their family members who have lived in the UK for at least five years will have until 31 December 2020 to apply for UK Settled Status. If they’ve been in the UK for less than 5 years, they can apply for Pre-Settled status until they have completed five years.
  • Irish citizens do not need to apply for the right to stay unless they wish to.
  • Details of the scheme can be found here.  

UK self-employed workers abroad

Self-employed workers working in the EU, EEA or Switzerland should check whether they will need to pay local social security contributions after we leave the EU – more information.

Travel

  • Freedom of movement under EU rules and legislation will cease immediately after a no-deal Brexit. This will have implications for the movement of both people and goods (see Customs).
  • Passports must have at least 6 months left and be less than ten years old to be valid for travel to EU countries.
  • Visas will not be needed for stays of less than 90 days.
  • Travel insurance with healthcare will be needed to cover trips. Access to state health care through the European Health Insurance Card (EHIC) cards may not be available.
  • Most travel services, including flights, ferries, Eurostar and Eurotunnel are expected to continue running after EU departure. Although, UK travellers will not be able to use lanes for EU, EEA and Swiss citizens and may be asked to show a return ticket at borders.

Travel information

Visiting Europe

Data protection

Most of the data protection rules affecting small to medium-sized businesses and organisations will stay the same after exiting the EU.

The UK is committed to maintaining the high standards of the GDPR (General Data Protection Regulation) and the government plans to incorporate it into UK law after Brexit.

  • No EU contacts or customers – where a business does not receive personal data from the EU, little or no additional work will be required to prepare for data protection compliance after Brexit.
  • Businesses that receive data from the EU – where an organisation receives personal data from contacts in the EEA, extra steps will be needed to ensure that the data can continue to flow after Brexit.
  • Businesses will need to comply with both UK and EU data protection regulations after Brexit if they have an office, branch or other established presence in the European Economic Area (EEA), or if they have customers in the EEA.

Data protection information

Small businesses

Resources

  • HMRC is running a series of webinars for businesses who trade with the EU. Sign up here.
  • The British Chambers of Commerce has a free checklist.

Latest updates

28 october

Completion of customs import declarations updated

HMRC updated help and support guidance for traders getting ready for Brexit. It now includes a link to register for a new webinar concerning the completion of customs import declarations.

23 October

Help with customs declarations in a no-deal Brexit

HMRC has updated its list of customs agents and fast parcel operators who can help submit customs declarations in a no-deal Brexit.

Read more about getting someone to deal with customs.

22 October

HMRC Brexit preparation guidance updated

HMRC has updated its Brexit preparation webinar guidance, aimed at traders preparing for Brexit.

Click to register for the next live webinar about getting ready for Brexit and the transitional simplified procedures that have been added.

17 October

Fears over VAT and Customs block deal

DUP opposition makes no-deal more likely

16 October

HMRC accelerate 95,000 firms onto simplified import procedures

HMRC has automatically registered 95,000 businesses for simplified import procedures. Known as Transitional Simplified Procedures (TSP), these should allow most traders up to six months to pay import duties and submit customs declarations

VAT guidance for EU businesses updated

The government has updated its guide for EU traders importing from the UK to include post-Brexit section.

Bringing goods to the UK from the EU through RORO ports

HMRC has updated its online guidance for businesses using roll-on roll-off (RORO) locations to transport goods to the UK from the EU in a no-deal Brexit.

9 October

Movement of Irish goods in a no-deal Brexit

HMRC has published guidance on how excise goods will be moved to and from Ireland in a no-deal Brexit.

Temporary tariff regime

The Government has updated the temporary tariff regime if the UK leaves the EU without a deal.

  • Lower tariffs on HGVs entering the UK market;
  • Adjust tariffs on bioethanol; and
  • Apply tariffs to additional clothing products.

Read more in our latest Brexit articles here.

AAT Comment offers news and opinion on the world of business and finance from the Association of Accounting Technicians.

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