Blogs/Vlogs

How to prepare for a 'no-deal' Brexit

19 February 2019

With just over a month to go before the UK’s scheduled exit from the EU on 29 March, and with no sign of a final Withdrawal Agreement being agreed between the UK and the EU, businesses should be taking steps to ensure that they are prepared for a possible “no-deal” Brexit.

Although differences will arise depending on the size and nature of your business, the following actions should be considered:

Review your Group Structure

UK businesses that operate in the EU will become third-country businesses in the event of a “no-deal”. As a result, your business may be impacted by certain restrictions imposed by individual member States, e.g. residency requirements and the amount of equity that can be held by non-nationals. In Germany, for example, there is a risk of losing limited liability status under German law for UK companies who have their administrative headquarters in Germany. On the flip side, for UK companies selling to the EU using EU suppliers, some business restructuring may be appropriate, such as setting up an EU branch or company for supply chain activities to avoid the costs associated with the cross-border movements of goods.

Assess your Supply Chain and source of goods

It is important to review your supply chains and the import/export trails, both from a duty cost impact under WTO rules, which could apply in the event of a “no-deal”, and the possibility of port delays. Some businesses are “stockpiling” to build up inventories ahead of 29 March, but this comes at a cost and risk of subsequent obsolescence if overdone.

Review contracts for redundant EU clauses that purport to include the UK

It is important for businesses to review existing contracts for references to EU legislation to identify any potential risks arising from a “no-deal” Brexit. It is also important to make sure you know which party to a contract is responsible for any additional duty and costs of delay as a result of a “no-deal” scenario.

Employee resource planning

If the Brexit Withdrawal Agreement is agreed, there will be no changes to the rights of EU citizens in the UK until the end of 2020. In the event of a “no-deal”, then EU citizens would have to apply for “settled status” under the EU Settlement Scheme by 31 December 2020 – this would only be open to EU citizens residing in the UK by 29 March 2019. It is important that you communicate this need to apply for “settled status” to your employees from the EU.

Import/Export

Apply for Authorised Economic Operator status (AEO). UK businesses trading with the EU will need a UK Economic Operator Registration Identification (EORI) number to continue trading if the UK exits the EU without a deal. As well as AEO status, there are a number of other special procedures which may help mitigate the impact of Brexit, such as applying for Customs Warehouse, Inward Processing, and a Duty Deferment account. For more details on the import and export aspects of a “no-deal” Brexit, please refer to our earlier blog by Michelle Dale.

Review local VAT requirements

You should check whether you will need to register for VAT in each EU member state where you currently sell goods to EU customers. Certain EU countries have different VAT regulations for EU and non-EU businesses. Our overseas offices in the UHY international network will be able to offer advice on the best solution for you.

Manufacturing

For manufacturers, will you still be able to export manufactured goods to the EU based on existing certifications? If you are a UK manufacturer of goods that is subject to EU-wide standards, you should review whether existing certifications will still be recognised in the EU, as certain UK bodies approved by the EU for certification purposes will no longer be recognised by the EU. As a result, products assessed by UK bodies will have to be reassessed by a body that remains EU-recognised.

GDPR

Post-GDPR, what about the transfer of data between group companies to or from the EU in the event of a “no-deal” Brexit? The current UK Data Protection Act (2018) will remain in place and it is expected that the rules on transferring data from the UK to the EU will remain unchanged with no additional restrictions. However, the position on transferring data the other way, from the EU to the UK, is not clear at the moment due to the complex mechanisms of the EU. You should monitor the position on data transfer from the EU to the UK and seek specialist advice as required.

Can we help?

If you would like to discuss Brexit planning, please do not hesitate to contact me or your usual UHY contact.

To read more about Brexit, visit our designated page here.

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