26 Nov How Brexit will affect international trade
On the 1st of January 2021, the UK is officially leaving the European Union. Where Brexit stands now, it seems like the possibility of a no-deal leave is getting bigger by day. This is bringing a lot of uncertainty, since no one knows for sure how Brexit will affect UK businesses.
What we do know is that planning now for a no-deal Brexit is crucial. If your business exports or imports goods to or from EU member countries, you need to be aware of the changes a no-deal leave will bring.
This article outlines how Brexit will affect international trade and help you prepare.
Importing and exporting post-Brexit
Imports and exports of goods to and from the EU will become significantly more difficult after Brexit. You may need to comply with new legal requirements, pay additional tariffs and adapt to new processes at the borders. Here’s a breakdown of steps you should take to prepare yourself for a no-deal Brexit:
Familiarise yourself with WTO rules
WTO (World Trade Organization) rules will start applying to the UK when trading with one of the EU states. All of the WTO members have to trade under same agreements with other countries and cannot offer better trading deals to one country and not another (unless there’s a trade agreement that allows it to do so). This means that the UK will have to sign trade agreements with individual countries, the same way it currently has with other non-EU countries. It also means that different tariffs, rules and procedures may apply when trading with different countries.
The UK is currently working on the Trade Continuity Agreements that would take place after Brexit. Find out more in WTO’s website.
If you are trading only within the EU member countries, it’s likely you never had to deal with customs declarations. However, in case of a no-deal Brexit, the UK will be leaving the EU Customs Union that allows free movements of goods in and out of the EU.
After a no-deal Brexit, you will have to start declaring the goods that you’re importing or exporting as well as undergo border controls. You will also have to fill out the required declaration forms (C88 and EU SAD) for moving your products.
Familiarising yourself with this procedure early on is key, since you need to ensure that you will have the necessary data and records to complete them.
Make sure you have an EORI number
EORI stands for Economic Operators Registration and Identification number. The UK businesses that wish to continue importing and exporting goods to the EU will have to provide the EORI number during Customs procedures.
The government did automatically enroll over 88,000 VAT registered countries to receive EORI numbers last year, but there are thousands of companies that are yet to register. You should find out whether you need an EORI number and register for it early on, as you may experience a lot of issues and delays without one after Brexit.
Tariffs are obligatory duties that you must pay when importing goods that originate in other countries. They make the price of imported goods higher, which essentially provides local producers with a competitive advantage.
Currently, the tariffs for imported goods from the EU are substantially reduced or even 0% for some industries. This will not be the case anymore after a no-deal leave. The tariffs that apply for non-EU countries will also start applying to the UK when trading with the EU states.
To find out what tariffs will apply to your business, you can use the tarif calculator that is based on the commodity codes of your products and the country you are importing from.
You need to ensure that you’re using the right commodity codes, so you pay the right duties on your imported goods.
While the UK is in the EU, any movements of goods into the country are considered to be for EU VAT purposes and the arrivals in the UK are classed as “acquisition”. This type of VAT is usually accounted for by the taxpayers, when filing their VAT return. However, once the UK leaves the EU, imports of goods into the UK will be for UK VAT purposes. This means that the accounting and reporting of VAT may considerably change.
The UK is likely to introduce a postponed import VAT accounting. This means that VAT registered businesses will be able to declare and recover import VAT on the same VAT Return, rather than paying it upfront and recovering it later on. Keep in mind that non-UK VAT registered businesses will not benefit from this and will be required to pay VAT upfront at the border.
As for exports from the UK and into the EU member states, there will also be some changes. With a no-deal Brexit, the intra-community movements will no longer apply, meaning that all movements of goods between countries will be treated as imports and exports and will be subject to the EU import VAT. Some of the EU countries also operate with a deferred import VAT accounting. However, the specific conditions vary on a country-by-country basis, so checking which of them will affect your business is essential.
New procedures for certain products
After a no-deal Brexit, there may be new rules and procedures that apply for the movement of specific goods. You should ensure that you are aware of these changes, if they affect your business. This will likely make the imports and exports of such products significantly more difficult and introduce new legal obligations.
An example of this is the imports of high-risk plants and plant products. There are already certain rules and additional procedures set up for importing plant products and you need to make sure you are fully compliant with these post-Brexit.
Account for delays at the borders
You need to keep in mind that all imports/exports might take longer to get through borders, especially straight after Brexit.
While the UK government promises to do everything in their power to ensure smooth trading, experiencing delays of up to 1.5-2 days will be very likely.
Make sure you take this into account when stocking up your products, as these delays could potentially disrupt your business operations and product shipping times.
Using a customs agent
A Customs agent is someone who will make sure that your goods go through customs with no issues and all legal requirements are met at all times. A lot of UK businesses will be hiring custom agents after Brexit to ensure an easier adaptation to the new custom processes and rules.
Getting professional help after Brexit is advisable, as the way you do business will significantly change. This also applies to getting guidance from a professional accountant to ensure that you’re paying the right duties and adapt your business to the new ways of handling VAT payments.
Let us help you...
Adapting to the new rules and procedures of trading after a no-deal Brexit will be difficult for most businesses. We want to help you have a smooth transition, so it affects you as minimally as possible.
We are a team of professional accountants and our clients include international businesses trading in the UK. With our experience, we will be able to review your current operations and supply chains and advise you on what changes you will have to make in case of a no-deal Brexit.
Outsource your finance function to us and we’ll handle your Accounting and VAT for you, while you can stay focused on running a successful business.
Call us on 01202 755600 or drop an email to email@example.com to get in touch.