The transition period is coming to an end. So, from 1 January 2021, your business will be affected. How ready is your business? In this blog post, we’re going to cover the main things you need to know when it comes to the financial implications of Brexit.
What’s changing? A quick recap
In terms of the financial implications, you need to act now if your business:
- Imports goods from the EU to Great Britain (GB)
- Exports goods to the EU from GB
- Moves goods to Northern Ireland from GB or vice versa
- Requires travel to and from the EU
Click here to read and/or bookmark our next blog in this series where we cover how the movement of goods will change.
14 key considerations when preparing for Brexit
We’re now going to move onto an overview of the 14 key things that will be changing. Not only might it be a little brief, new information is being released all the time.
So, while this blog post is correct at the time of publishing and we’ll be updating it periodically, for a more tailored, up-to-date breakdown, check out the UK Government’s Brexit Transition website. The website will walk you through several questions and give you a list of things your business needs to do to minimise any issues after 31 December 2020.
1. EORI number
Used for VAT documentation and to exchange information with Customs Authorities, the Economic Operator’s Registration and Identification (EORI) number is required if you’re moving goods between GB (which includes England, Scotland and Wales) and the EU. In some cases, you may also need it if you’re moving goods to and from Northern Ireland and the EU.
You might need one or more of the three types of EORI numbers, depending on where you import and export.
2. Commodity codes
From 1 January 2021, the UK will keep using the same commodity code system that’s currently used within the EU. This will be required on export documentation.
3. Import tariffs
From 1 January 2021, goods imported into the UK will not only be considered as ‘imports’ rather than ‘arrivals’; they will also have a UK-specific tariff. This is detailed under the UK Global Tariff (UKGT) which you can read more about here.
4. Export tariffs
In the event of a no-deal Brexit, exported goods will be subject to tariffs set in their destination countries. So, EU customers may have to pay EU tariffs. These tariffs are currently unknown, but they’re thought to follow World Trade Organisation (WTO) rules.
5. Regulatory Changes
The UK is working on creating regulations to reflect those already enshrined within the EU. These may not all be completed by 1 January 2021 and all require EU acceptance.
6. GDPR and Data Regulation
There may be changes to the regulations surrounding data and GDPR. The EU will need to make an adequacy assessment decision.
7. Northern Ireland Protocol
The Northern Ireland Protocol exists to eliminate the need for a hard border on the island of Ireland. So, the movement of goods to and from Northern Ireland will be subject to this Protocol and, where appropriate (ie supplies of goods to and from the EU), the country will report under the ‘XI’ country code rather than ‘GB’.
Intrastat reporting will still be required for businesses in GB and Northern Ireland:
|Goods movement direction||UK Intrastat required?|
|Importing into GB from EU||Yes, until 31 December 2021|
|Importing into NI from EU||Yes, until the end of the NI Protocol|
|Exporting from GB to NI||No|
|Exporting from NI to EU||Yes, until the end of the NI Protocol|
|Exporting from GB to EU||No|
9. Postponed Accounting Scheme
This is a new government scheme that allows VAT-registered businesses to declare and recover VAT paid on imports through the VAT Return. It’s also available for imports from non-EU countries.
From 1 January 2021, a simplified procedure for triangulation will no longer be available. This may have implications for intermediary businesses so we’d advise you seek expert advice.
11. VAT implications for UK businesses
From 1 January 2021, the domestic VAT rules in the UK (includes Northern Ireland) will stay the same. But, the VAT rules relating to imports and exports to and from the EU will change. They will be treated in the same way as imports and exports to and from non-EU countries.
12. Goods: Importing and exporting for Northern Ireland
The rules for Northern Ireland will be defined from the Northern Ireland Protocol. As they will remain part of the EU customs and VAT regime:
- Imports and exports to and from EU countries will still be classed as ‘arrivals’ and ‘dispatches’
- They will follow the current VAT rules in the EU
As for goods moving between GB and NI, these will be treated the same as before:
- Domestic sales and purchases
- Same VAT treatment as the current UK domestic VAT rules
From 1 January 2021, the general rule is that sales of cross-border services from one business to another will be subject to the tax of the customer’s country. So, the current ‘reverse charge’ principle for imported services will still apply.
14. VAT reporting
There may be some changes to your business’ VAT reporting process:
- For GB legal entities - customer and vendor Sales Tax (VAT) Groups will need to change from EU to ROW or something similar. There will also be no need to distinguish between B2B and B2C customers in the EU
- Note – this could mean GB businesses selling B2C in EU countries may have to register for the local VAT if the turnover threshold is exceeded
- For EU legal entities - Sales Tax Groups for GB customers and suppliers will need to change from EU to ROW (but for Northern Ireland customers and suppliers, it can continue to be treated as EU)
- For NI legal entities - Sales Tax Groups can stay the same
Accelerate your Brexit preparations by speaking to an expert
We hope that you found this blog post useful. Though, while it might provide an overview of how a no-deal Brexit may impact your business, you should still seek advice on exactly how such a scenario can affect you. At Columbus, we’ve been helping our customers transition and prepare. Why not let us help you as well?
Get in touch with us today and get your business prepared for Brexit.