None of us could have escaped the endless Brexit headlines that have dominated our news this past year. While it is far from a done deal (if, indeed, there is a deal), the UK is scheduled to leave the EU at 11 pm UK time on Friday, 29th March 2019. It is permissible for the UK to put a stop to the process and choose to remain in the EU any time before this date, but now that Theresa May has enshrined this date in British law, it seems unlikely.
So what exactly does Brexit mean and how can you, as a small business owner, prepare? With so much uncertainty around the final Brexit deal, wading through the existing advice and guidance can be overwhelming and extremely confusing. Now would be the perfect time to engage the services of a small business accountant to guide you through the process. It is their job to remain up to date with all the latest rules and regulations. Leave it in the hands of the experts and you can focus solely on running a successful business.
That said, it is your business, and keeping abreast of the issues surrounding Brexit and ensuring you have an overarching understanding of what’s going on would be a wise move.
The term has been bandied around for so long that you feel a little silly asking. But what exactly is Brexit? It’s a good question. On the 23rd June 2016, the UK voted, via a referendum, to leave the European Union (EU). The EU is an economic and political partnership involving 28 European countries. It is a “single market”, which allows people and goods to move freely between its member states. The term “Brexit”, now widely used, is credited to Peter Wilding, the Chairman of British Influence, who wrote about Brexit in May 2012. The word is simply an amalgam of Britain and Exit and is a shorthand way of referring to the UK’s departure from the EU.
With all the talk of deal, no deal, another referendum and calls for a general election, you could be forgiven for thinking that Brexit may not happen in March, if at all. So why worry about the potential implications for your business?
Theresa May has set the 29th March 2019 as the official date the UK will leave the EU. Brexit could be cancelled, but it would require a change in the law — something most people want to avoid. It is possible that the date will be pushed back, with Labour hoping to force a general election to enable them to step in and renegotiate the Brexit deal with Brussels. This would necessitate delaying the March deadline. Likewise, if those calling for another referendum get their way, it is hard to see how the March deadline would stand. However, this currently lacks sufficient support to grow any legs and is an unlikely cause for delay.
The majority of all involved are pushing to reach an agreement in time to meet the 29th March. This date could change, but any small business accountant would say that it is better to be over rather than under prepared.
With Theresa May still trying to get a better deal from the EU and battling to rally support from her Tory MPs, there is still no certainty about what Brexit will mean for businesses. How can you plan for something that is so ambiguous? If the UK does leave the EU on the stated date — or, indeed, at any other time — it will certainly have implications for businesses that sell and buy from the EU. If you fall into this category, you should start to put some plans in place and make sure that they are flexible enough to be adapted.
The Institute of Chartered Accountants in England and Wales (ICAEW) has put together a helpful checklist outlining a variety of areas that could impact your business. How these affect your business will depend on there being a deal made with the EU — or not — but understanding where you may need to make changes and being prepared to make those changes is a great place to start.
If the UK fails to make a deal with Brussels, customs declarations will need to be completed for goods being moved between EU countries. Now is the time to assess your business and determine if you have the capacity to integrate with European and UK digital customs systems. If you don’t, you may need to source a broker who can help you. The UK government has instructed importers and exporters to prepare for a no deal by registering for a UK EORI number, deciding whether to engage an agent or make their own declarations, and checking if the organisation that moves goods would need additional information from the other party. Importers should also register for Transitional Simplified Procedures, while some businesses may need to apply for an export licence. You should use supply chain mapping to prepare for a worst-case scenario Brexit. This will allow you to identify any points in the chain where you might incur extra tariffs.
If there is no deal, the UK assessment and certification of products and services may no longer be recognised in the EU. This is likely to affect packaging and labelling. It’s vital to make sure your documentation and databases of the standards, certification and labelling requirements that apply to your products and services are up to date. This will make it easier for you to identify any issues once the Brexit “deal” has become clearer.
If you’re trading across EU borders, you may need to renegotiate contracts to clarify key terms and agree how VAT will be managed. If there is no deal, those companies you’ve been trading with for years within the single market will suddenly become an international exporter or importer, which will change the terms and conditions that need to be applied.
If you employ EU nationals, they will need to apply for “settled status”. Now is a good time to make sure that you have systems in place to track the nationality status of your staff and ensure compliance with immigration regulations. If you’re worried about losing staff to Brexit, take a close look at the package you offer your employees. Consider improving benefits and terms and conditions to retain and motivate valuable staff.
If the UK leaves the EU, port procedures will become more complex and time-consuming. Your business will need to allocate additional resources for conducting inventory.
VAT and customs duties are highly likely to be affected by Brexit, as they are based on EU law. The breadth of these potential changes falls outside the scope of this article, but if you rely on imports or exports, you should ask your accountant to advise you on changes to dispatches and exports, EC sales lists, Intrastat, acquisitions and imports, VAT refunds, customs duty and more. Tax will be the aspect of your business likely to see the most change. The advice and guidance available on the subject are abundant and complex, making this an area where you should definitely seek out the help of an expert financial adviser.
The full implications of Brexit on small businesses may be unknown, but that doesn’t mean you can’t start preparing for change. Conduct a “Brexit audit” to assess how much of your business will be affected by changes to trading with the EU and make sure your books are in order. If your business is organised and you have a solid grasp of potential areas that may be affected, you’re on the way to being prepared. A small business accountant can help you understand the more complex implications of the many possible outcomes, as well as help you to create a strategic plan that ensures you are as prepared as possible. Don’t delay. March 29th is rapidly approaching and now is the time to Brexit-proof your business.
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