Brexit – what you need to know

Brexit – an update

The UK’s departure from the European Union, following the referendum decision to leave, was due to take place at 11:00 pm UK time on Friday 29 March 2019.

Following Parliament’s decision not to back Prime Minister Theresa May’s withdrawal deal, Brexit will now be delayed.

The EU has now granted the UK a “flexible extension” until 31 October 2019. This provides the UK with up to six months to find a way of leaving the EU. Further debates in the House of Commons are ongoing. The Prime Minister’s previously rejected deal is still a possibility although a cross party deal, a no deal Brexit, a further referendum, General Election and even a move to revoke Article 50 – effectively cancelling Brexit – have all been put forward as possible alternative scenarios.

Richard Anthony – solving problems in a time of uncertainty

Not knowing which way Parliament will vote or what trading relationships the UK will enjoy post-Brexit is causing distress to businesses and, understandably, generating a great deal of insecurity.

At Richard Anthony, our expert team are here to help businesses prepare for the future.

Despite the present uncertainty, we can work with you to ensure the right safeguards and securities are in place to protect your business going forward.

We can advise on:

  • Advising overseas businesses and investors investing or starting up in the UK
  • Corporate restructuring, business expansion and investment
  • International tax planning
  • Payroll
  • Company formation
  • Supply contracts
  • Variations of existing contracts
  • UK and international joint ventures including shareholders agreements
  • Finding customers overseas for your products or even your business
  • Insolvency

Frequently asked questions about Brexit

What’s the latest advice from HMRC?

Ahead of Britain’s upcoming departure from the European Union (EU), HM Revenue & Customs (HMRC) is warning businesses about the necessary steps they need to take to prepare for the unlikely event of a no-deal Brexit.

The Government is currently in the process of negotiating with the EU in a bid to reach a withdrawal agreement that will ensure a smooth departure next year.

The deal will need to be ratified by both the UK and EU Parliaments and until this happens the Government will continue to plan for both deal and no deal scenarios, which is why businesses are being urged to do the same.

Earlier this year HMRC sent an initial warning to businesses who import or export goods within the EU, warning that should we fail to reach a deal, there would be immediate changes about the way that businesses trade with the EU.

In recent days, HMRC has prepared a second letter that will be sent to those businesses, detailing the three steps that businesses should take now to prepare for the possibility of no deal.

The first of these steps is to register for a UK Economic Operator Registration and Identification (EORI) number at https://goo.gl/paAobk.

Businesses will need an EORI number to continue to import or export goods with the EU after 12 April, should the UK leave without a deal. They will also need the number to apply for upcoming authorisations that will help to make the customs processes easier for businesses.

The second step that businesses will be advised to take is to make a decision as to whether or not to hire an agent to make import/export declarations, or if the business would like to make these declarations themselves through software that interacts with HMRC systems.

Whatever the decision it is encouraged that businesses take steps to prepare by either contacting an agent to find out what information they require or contacting a software provider to ensure their product meets the requirements of the business affected.

The final action HMRC is encouraging businesses to take is to contact the organisation that moves their goods to find out if any additional information needs to be supplied to allow that organisation to make the correct safety and security declarations for the goods.

Will the UK continue to be part of the single market?

It is not yet fully clear whether the UK will remain in the single market. However, the current UK government has articulated that it wishes to leave the single market and will rely instead upon a bespoke trade deal with the EU, which is yet to be negotiated. To assist businesses there may be a period of transition after Brexit to help them adjust.

At present, the only way to be in the single market is to be part of the European Economic Area (EEA), either as a member of the EU or a member of the European Free Trade Association (EFTA).

However, the UK may decide to choose to trade by the rules stipulated by the World Trade Organisation (WTO). This would avoid the complexity of creating a new free-trade agreement, but would also remove any favourable relationships Britain has with the EU or any other trading block.

What are the economic consequences of Brexit?

The economic impact of Brexit is difficult to accurately assess. However, the strong consensus amongst the majority of economists and research institutes suggests that Brexit will negatively impact the British economy, at least in the short-term.

How will this affect the export of goods and services?

A lot still remains unclear about the future of UK trade and much will rely upon the government’s ability to maintain a relationship with the Single Market, either by remaining a part of it or establishing a close partnership with it.

If the government fails to reach an agreement on this issue before the UK leaves the EU, the country may find itself in a position where it has to re-affirm or renegotiate trade agreements with all 27 member states.

In the meantime, the lower price of the pound against the euro and the dollar means that there may be an opportunity to make British goods and services more competitive.

How will this affect the import of goods?

While exports will benefit from the weakened pound, the opposite is true for imports and businesses reliant on the import of raw materials or components from foreign suppliers may find that their costs increase as a result.

Will import/export tariffs be applied?

If the UK leaves the EU without securing an agreement on a new relationship, UK trade relationships with the EU would be governed by WTO rules, under which EU member states would be obliged to charge tariffs on UK goods at the rates agreed for WTO members that do not have a preferential scheme or trade agreement in place with the EU.

If the EU were to waive those rates for the UK, it would also have to waive them for the same products for other countries.

The UK would also have to charge WTO rates on goods it imports from the EU. However, it could waive tariffs on imports from the EU, but would also be obliged to waive the same tariffs for products for all countries in the world with which it does not have a trade agreement under the WTO’s rules.

Will this mean less red tape for businesses?

Much was promised in the run up to the referendum about businesses seeing a reduction in red-tape and bureaucracy following a vote to leave. However, many of these issues may persist after Brexit, especially if businesses wish to trade with other EU member countries.

Many of the strict guidelines will still need to be adhered to if a company wishes to sell its product into the member states. Products sold into any nation around the world must meet those countries guidelines so many of the former processes and administration will still need to take place.

How will this affect non-dom status?

If freedom of movement is curtailed then those that have non-domicile status may face issues when trying to seek advantages from living overseas.

The ability to switch residence between the UK and overseas tax havens may be hindered, although in reality not to any great extent.

Mrs May has said she wants to push ahead with plans set out by the Migration Advisory Committee (MAC) to allow skilled workers to enter the UK if they earn above £30,000, ending immigration of low-paid staff. This has so far not been ratified.

Will this mean an end to double-taxation rules?

Most of the UK’s Double Tax Treaties, which are extremely important to overseas investment in the UK, contain their own provisions that prohibit a country from imposing tax measures that may discriminate against a person or company from another state so these are unlikely to be affected by Brexit.

Are my European staff members likely to be affected?

It is unclear yet what rules will be negotiated regarding freedom of movement and the continued residence of European member state residents in the UK.

However, it is unlikely that current citizens living in the UK or the rest of the EU would be forced to leave and the measures would be likely to only apply to future movement.

Employers could support EU workers with settled status which will ensure that they can continue to live and work in the UK after Brexit.

The immigration minister has confirmed that UK employers will need to conduct immediate “right to work” checks on all EU staff in the event that the UK leaves the EU without a deal.

Will this meant the end of VAT?

As the negotiations on Britain’s exit begin we may begin to see some discussion about the future of VAT, which is a Europe wide tax that is bound by the EU VAT Directive.

This set of European rules has limited the UK’s ability to set its own VAT rates and reliefs. However, post-Brexit the government may find that they are free to decide their country’s own rates of VAT and we may see a divergence from EU practices.

What affect will Brexit have on my suppliers?

Many businesses will be focusing on their own business when it comes to the issues raised by Brexit, but it is important to consider how it will affect your suppliers.

If part of your supply chain is reliant on businesses that import raw materials and components from overseas then you need to be prepared for an increase in costs that may be passed on to you and your business as a result of the weaker pound.

Businesses are likely to be under stress over the next few years due to the uncertainty they are facing, the collapse or financial difficulties of a supplier are often passed up the supply chain, so it is best to prepare your business for this.

 

At Richard Anthony we solve problems.