It’s a question we are all eager to get an answer too!
If our politicians don’t agree on a clear way forward – and it’s nearly three years since the Brexit referendum – what hope for the rest of us! I’m certainly not here to wave a magic wand, but I can share with you what various Government departments have concocted to date which, hopefully, should provide some useful guidance as to what may lie ahead for contractors or small business owners.
As I write this, there is a great deal of uncertainty as to whether there will be a no-deal Brexit. Parliament has indicated that it will not tolerate such an event, but there seems to be little appetite for Theresa May’s withdrawal agreement, unless alternative arrangements can be found to the so-called Irish backstop.
The Government clearly believes that the risk of a no-deal Brexit is considerable and, indeed, it remains part of the Government’s negotiation policy to keep this option on the table. So, in an effort to quell the concerns of the public and industry, it has produced a series of guidance notes covering everything from travelling to Europe in the event of a no-deal, to EU funded programmes.
In the interests of clarity, if Theresa May does manage to get the backing of Parliament for her deal (whatever form that might take), there will almost certainly be a two year (or longer) transition period, during which it is hoped some form of trade deal with the EU will be agreed.
If that happens, then there will be little if any impact, in the immediate future, on anyone living or working in the UK and you can stop reading any more of this article. If only it were that simple!
However, if a no-deal becomes the default option, there are quite a few things that need to be considered, as the Government guides explain. Regrettably, they all have the potential to impact our everyday lives in some way, but I have highlighted the ones that are most likely to affect small businesses and the self-employed – each with their own degree of nuisance factor!
Trading in Goods
The Trade Secretary, Liam Fox, has recently indicated that he is considering a period of zero tariffs of goods imported into the UK, in the event of a no-deal Brexit. However, as it currently stands, any goods imported into the UK from the EU after 29 March 2019 (the official date of the UK’s departure from the EU) will be subject to tariffs, as set down by World Trade Organisation (WTO) rules, which state that the same rate of duty must be charged equally to all WTO members. These rates are referred to as ‘most favoured nation’ (MFN) rates. Similarly, goods exported to the EU from the UK will also be subject to the EU’s MFN tariffs (the rates of which may change).
When importing goods after a no-deal Brexit, you will need to refer to the UK Trade Tariff in order to apply the appropriate commodity code to the goods you import. You will then be required to pay the appropriate import duty on the goods you have imported, usually to an import agent, before the goods can be released to you. Broadly speaking, the same rules and procedures will be applied to EU goods as is currently the case for goods imported from countries outside the EU.
Before any goods can be imported to the UK from the EU after a no-deal Brexit, you will need to register for a UK Economic Operator Registration and Identification (EORI) number. If you don’t already have an EORI number, we recommend that you apply for one as soon as possible. You should also check if you need an import licence which applies to specific types of goods.
If you are VAT registered, you should be able to reclaim the VAT paid to the import agent – provided you have a certificate of VAT paid (called a C79).
Exporting goods to the EU works in a similar way to importing from the EU. You will still need an EORI number and you will almost certainly need to appoint a customs broker. You may also require an export licence for specific types of goods.
Trading in Services
Currently, it is fairly easy for UK nationals to provide their services to clients in the EU. Non-regulated professionals can work freely in the UK and EU and there are various reciprocal arrangements for regulated professionals (such as accountants and lawyers) for EU and UK nationals working in the UK and EU respectively. But after a no-deal Brexit, these arrangements will no longer exist.
If you are a non-regulated professional from the UK, who wants to provide services in the EU, you will need to check if you require a work permit or visa to continue working in that EU country after 29 March 2019.
It is slightly more complicated if you are a regulated UK professional operating in the EU, as it will also be necessary to check the regulations for non-EU citizens, in the country you are working.
Regarding EU nationals already operating in the UK, there is not expected to be any change, but for EU nationals looking to provide their services in the UK for the first time after a no-deal Brexit, there are likely to be new requirements (which are yet to be determined).
VAT
Currently, there is no VAT payable on goods imported from the EU. However, in the event of a no-deal Brexit, VAT will become payable on those goods. However, there will be a new system introduced whereby rather than paying import VAT at the time of import, VAT will be accounted for on your VAT return. This will apply to goods imported from the EU and elsewhere, which is designed to help your business cash flow in the event of a no-deal Brexit.
For goods exported to the EU from the UK, VAT will no longer apply to the sale of those goods to individuals or businesses and they will be treated as zero-rated supplies. Neither will you be required to submit an EC sales list, as is currently the case.
For the selling of services to the EU, the place of supply rules remain unchanged, in that the place of supply to businesses will still be the location of the customer and, therefore, no VAT should arise. The rules are slightly different for the sale of digital services and, if that affects you, you will need to register for the Mini One Stop Shop non-union scheme in a member state. But this can only be done after the UK has left the EU.
Data Protection
In the event of a no-deal Brexit, the UK Government has confirmed that you would still be able to continue sending personal data from the UK to the EU. However, in order to receive data from an organisation in the EU, you would need to check that the EU had made a so-called ‘adequacy decision’. Without this, there is a significant risk to the EU organisation that they will be in breach of EU law, so it is hoped and expected that an adequacy decision can be made quickly by the European Commission.
Does that clarify things for you?
We appreciate the threat of no-deal can be daunting and that there are other areas not covered in this article, for example travelling to the EU after a no-deal Brexit. Nevertheless, with some careful planning, the impact on most small businesses and professionals should be manageable. We just have to wait and see how things play out politically before further details and exact timescales become evident. Watch this space!
In the meantime, if you would like to discuss your own particular situation in more detail, or if you would be happy to share your own thoughts on contracting and running a business in a post- Brexit world, we are here to provide any support and advice we can. To get in touch, call +44 207 965 7338 or email: enquiries@davidcouch.net
