The new year is approaching fast and so far, no agreement has been made between the EU and the UK. If no deal is reached, then on January 1st 2021, the UK will leave the European single market and customs union.
In this article, I will explain what this means for EU businesses with regards to UK customers, imports, exports, and VAT.
What is happening right now with Brexit?
The UK left the EU in January 2020 and entered into a transition period lasting until January 1st 2021. The two sides are currently negotiating to get a deal that will take place from January onwards.
The negotiations are concerning several topics, but mostly trade, state aid, the movement of people, and border issues (specifically between Northern Ireland and the Republic of Ireland). The negotiations have been ongoing for several months but no concrete plans have been announced as of mid-November.
If an agreement has not been reached by the end of the year, then the UK will be leaving the EU with a hard (no-deal) Brexit.
What should my EU business do to prepare for a no-deal Brexit?
It is becoming increasingly possible that no deal will be agreed upon by the end of the transition period. EU companies that do business in the UK should start preparing for this as soon as possible to avoid disruptions in the new year.
When the UK leave the single market and customs union, tariffs and customs checks will be applied to UK imports and exports. You should expect border delays in early 2021.
Your EU business will be affected by Brexit if:
- You purchase goods or services from the UK
- You sell goods or services in the UK
- You move goods through the UK
Here are some ways that your EU business can prepare for a no-deal Brexit. We created a broad overview that will help businesses in the majority of EU countries, however, you should also check with your local government to receive specific advice.
Get an EORI number
If you plan to import or export goods to the UK in 2021, you will need an Economic Operator Registration Identification (EORI) number. This is required for any imports or exports from outside of the European Union.
You can apply for an EORI number from your country’s government website.
Register with the national customs authority
If your company imports or exports goods from the UK, you will need to register with your country’s customs authority in order to make import and export declarations.
You may also need an import or export license for certain goods as new restrictions are put in place. This will mostly affect goods such as food, drinks, and agricultural products.
You can find information for each EU country on the European Commissions website.
Decide how to submit customs declarations
Since the UK will no longer be a part of the customs union, all goods going between the EU and the UK will incur tariffs and customs duties. You will need to submit a customs declaration for any exports to the UK.
Creating customs declarations can be complicated, so you should assess if you have the knowledge and tools necessary to do it yourself, or if you should hire someone to do them for you.
If your business is not established in the UK, then you will need a UK trading partner to make the UK declaration. This can be a customs broker, parcel operator, freight forwarder, etc.
Customs declarations need to be lodged prior to arriving at the port of departure.
Check if you can use simplified customs processes
You may be able to use a simplified process for things like customs declarations and transit procedures. Eligibility depends on what type of goods you will be importing/exporting, where your business is established, your previous VAT and business compliance, and the licences your business holds.
Each EU country will have different procedures, so it is best to contact your national customs authority for specific information.
Be prepared for extra fees
Be prepared to pay tariffs and duties on imported goods. Import VAT will also be applied along with the customs fees. This should be taken into consideration when creating your budget for next year.
Contact your business partners
Check with your suppliers, carriers, etc., to see if Brexit will impact your business relationship. They will likely also need licences, and customs declarations so it would be best to contact them to ensure that your inventory won’t be affected in January.
A no-deal Brexit will likely have an effect on how you record your VAT if you purchase and/or sell to the UK. VAT has not been one of the central topics in the negotiations and very little information has been released about VAT changes.
While we await more information, here are some things to keep in mind:
- If your business is currently registered for VAT MOSS in the UK, you will need to register in an EU member state as soon as possible.
- EU businesses may need to pay VAT on importation unless there is a deferral plan created.
- The reverse charge mechanism may not apply for UK customers and suppliers.
- Northern Ireland will likely remain the same in terms of EU VAT procedures, but Great Britain will not.
Brexit will have an impact on your business if you sell, buy, or move goods through the UK. You should keep up with the news to see if there are any updates on a Brexit deal. You should also start preparing as soon as possible for a no-deal Brexit scenario.
For specific information about how your business might be affected, you should visit your government’s website and we will be posting updates on our blog.