Navigate the uncertainity with our Brexit Specialists.
With so much uncertainty surrounding Brexit, what form it will take, and the repercussions it will have on the British economy and British businesses it would be hard to state that anyone is an expert on Brexit yet.
However, our legal team and accountants are going to be among to first to understand the ramifications of any and all situations that develop surrounding Brexit, and are in the best situation to help you insulate your business from negative effects.
To see what they can do for you and your business and support you at this uncertain time, feel free to contact us. Alternatively, look at the advice below that should help all businesses that are importing or exported goods from the EU.
A ten point checklist for businesses that trade with the EU
The begin of a great adventure
Becoming an Authorised Economic Operator AEO - or Authorized Economic Operator accreditation makes the processes involved in importing and exporting goods faster and easier.
In the event of a hard Brexit this will be of utmost importance, especially for manufactures and retailers with complex and large supply chains.
Due to Brexit HMRC are dealing with an increased amount of applications for AEO, the application for which can already take as long as 6 months. It is imperative you apply for AEO immediately so that you can minimise any disruption to your businesses trading after Brexit.
The application for AEO is quite complex. It is recommended that you seek support from a professional during this process to ensure a fast and smooth AEO accreditation.
It is important for you to check that you are registered for VAT in each EU country where you export your goods.
Whilst the EU is one big trading block, individual states and regions have different registration requirements for VAT if you are an EU or non-EU business.
Post Brexit, all British business will have to ensure they meet the non - EU businesses requirements for VAT.
It is likely that you have already registered for VAT within the EU, however, you should ensure that your company meets any local compliance requirements.
You may need to re-register if requirements do change. 'Triangulation', which is the simplification fo the VAT for goods that are moved within the EU may also change, or end for UK businesses.
Supply Chain Investigation
Most businesses that are trading with the EU are already looking at their supply chain, however, have they looked closely enough?
Some good questions to ask are whether you can mitigate delays on import or export? Should you create inventories? Could any issues of obsolescence arise to your inventories if the goods are perishable or seasonal and you have overstocked them? How can you fund increased inventories and working capital requirements? Do you have the appropriate facilities?
In the terms of supply contracts, who is to bear any extra costs for delays, changes in price, additional duty and foreign exchange risks? Could there be delays of vital services? For example, maintenance services and spare parts in the vent that these services are provided from other countries in the EU?
There may be no quick fixes to what you find here, and the answers may not be easy, however it is vitally important that these questions are considered.
Goods Origin Analysis
For any goods and components you use you will need to understand its 'economic origin'. Knowing where they are manufactured is key, and will require an in depth analysis of said goods or components.
In the event of a future EU/UK free trade agreement, knowing the economic origin of products will be essential in determining whether your business may benefit from zero tariffs at the time of import into the UK.
This is a benefit that can be gained when certain rules on the economic origin of the goods in relation to the economic added value of the goods is met.
However, if there is no future EU/UK free trade agreement, a UK business will still need to understand the 'economic origin' to make sure that they are able to manage their duty costs and be able to gain any duty reliefs that may be available.
Establish an EU Presence
Making an EU presence, setting up subsidiary companies in the EU prior to Brexit could offer large regulatory advantages.
As an example, HM Treasury are considering granting the EU financial sector short term access to UK markets in an attempt to protect the UK as a financial centre, however, it is not guaranteed that EU countries are intending to do the same.
In July 2018 the UK Government's white paper laid out a vision of 'third country' status being applied to the UK. However, it may prove very difficult to negotiate a position with the EU that allows British businesses greater access to the EU market.
Many companies, are already setting up subsidiary companies in the EU to gain a local presence within the EU market, this has been particularly noted within the financial sector. There is still time for your business to do the same. However, at this point, buying a local business may be the fastest option.
Consider Your Workforce
A final report by the Migration Advisory Committee has been published concerning EEA migration.
This final report makes recommendations to attract and protect skilled EU workers living and working in the UK. However, it has not extended these recommendations to include what are considered to be 'non-skilled' workers.
These recommendations could have large ramifications for many employers if they are adopted, especially in sectors where there are a large number of EU nationals employed, for example healthcare, hospitality, retail, construction and food production.
Will your groups or companies structure still work effectively after Brexit?
It is possible that your board may well be considering these issues already, especially after the reforms to US business tax and the continued changes that have arisen due to the OECD's Base Erosion and Profit shifting project.
After Brexit, the UK will no longer benefit as a result of the EU parent subsidiary directive. Withholding taxes may be possible on interest flows and dividends between EU group members and the UK. OF the 27 tax treaties between the EU and the UK only 17 allow zero withholding taxes.
It could be possible for you to change the structure of your group so that the groups subsidiaries that are resident in EU states, as well as the income flows back into the UK could still gain benefits for zero withholding taxes.
Every business will rely on forecasts to make management decisions, for example, valuations, budgets, impairment reviews, going concern assessment and tax planning.
Excluding short term forecasts,all forecasts will explicitly or implicitly have made assumptions about the effect of Brexit.
Perhaps if it is only that there will be no effect. Regardless of what assumptions your forecast have already made, these should be reviewed.
Some good questions to ask are. Are these assumption realistic or prudent? What if the assumptions we have made are materially incorrect? How have these assumptions already impacted on our management decisions? Considering worst case scenarios, reviewing forecasts could show areas where greater contingency planning could be prudent.
For you to move personal identifiable data between EU and non EU countries, which the UK is soon to become, you will need to have an EU approved data protection framework or you will be breaking EU law and could face penalties.
Please note, the UK Data Protection Act (2018) is not up to EU requirements. So, when the UK leaves the EU, whilst UK firms will be able to send personal identifiable information to EU companies, unless they have an EU data protection framework, EU companies will not be able to send the information back.
Businesses should assess what EU restrictions are in place to make certain they are compliant with the EU's export/import restrictions and prohibitions.
For example, there are restrictions on the export or import of certain foods from and to third countries. Plant products, wast products and live animals all need specific notifications or permits.
If the UK comes out of the EU with 'no-deal', UK businesses will be subject to these restrictions with immediate effect as of 11.00 pm 29 March 2019.
Many businesses are asking at this time what affect Brexit will have on them, the accountancy sector is no different. Recently the Government lost the vote on the deal it proposed for Brexit. This has led to further uncertainty and speculation about what the future may hold, and in what form Brexit will take, and therefore the affect it has on us and our clients.
That is where we will chiefly feel the affects of Brexit, through the effects it has upon our clients.
Some businesses may relocate, and in fact, some are making contingencies to do so. Increased customs checked with EU trading partners may affect supply chains, changes to freedom of movement could lead to skill shortages, changes could occur to contracts through the amendment of laws.
A large concern is that Brexit will have a large detrimental impact on economic activity, which in turn could lead to our clients being less financially stable. Which naturally would mean that there would be pressure on accountants to lower their fees.
However, uncertainty could also be beneficial to the accountancy sector.
When things are uncertain, and rules and regulations changing, clients need more support and advice alongside extra support with forecasting, planning and the management of working capital.
As accountants will be among the first to understand the ramifications of the changes bought by Brexit, and understand the changes in regulation and taxation, the easiest way to offset these risks for our clients is to help and support them through these uncertain times.
If there is a deal with the EU then the business sector will be much more confident, at least to begin with.
The business sector craves stability and certainty, in the event of a deal the status quo would be maintained until at least the end of 2020, which will allow all businesses time to adjust and plan. However, changes will still come into effect after the transition period.
In the event of a deal British qualifications are likely to still be recognized across Europe. Currently, the system is that qualifications are checked by the country in which they are to be used, and if satisfactory can be used across the whole of Europe.
Under the Draft Withdrawal Agreement and Outline of the Political Declaration, the qualification s equivalence would only be for the country that you have made an application.
So, if you were to take a job with a company in Germany that also operated in France, you may need to apply for recognition of your qualifications in both countries.
Applications for recognition of qualifications in European Union member states can currently until 31 December 2020, which is the end of the transition period. However, there is also a further 9 months after this for applications to be determined, which will cease on August 31 2021.
Whilst going through the transition period, the United Kingdom are going to remain within the customs union. As a result, no changes to customs and VAT will take place during this time. However it is certain that after this gradual changes to both will occur.
In the event of no deal, there will be almost certainly be further uncertainty and upheaval in the short term. Refusal by parliament to back any deal put before it will mean that we will go to a no-deal scenario.
What does this mean?
The Bank of England have stated that in either a deal or no deal scenario economic activity in the UK will be depressed compared to previous levels. This will mean more challenging trading conditions for individual companies. Conversely, accountants have a tendency to do well in more challenging times. The uncertainty ahead is an opportunity for accountants to step up and use their advisory skills to assist and support their clients.
AAT members should be advising their employers and clients to test their resilience in the event that sales dip, or supply chains operating more slowly, or if debtor days actually increase.
At some point in the future, tariffs and customs declarations are certainly going to apply on all imports and exports to and from the European Union.
In the event that parliament has a change of heart and decides to now back Theresa May's deal, this will not occur for 2 years until the end of the transition period.
However, if no deal is ratified by parliament in time, this will occur at exactly 11pm 29 March 2019.
In the event that the United Kingdom leaves the European Union without a deal, business in the UK will have to apply VAT, customs and excise procedures to goods that are imported or exported to the European Union in much the same way that they currently apply VAT, customs and excise to goods that are traded with countries that are outside of the European Union.
Understandably, as a result of this there will be implications on cash-flow. As a result the Government has stated that in the event of a no deal Brexit it would introduce postponed accounting, which would apply to import VAT on products imported to the United Kingdom.
This will mean that instead of having to pay import VAT on goods as soon as, or soon after they arrive at the border, UK VAT registered businesses can pay the VAT later on their annual tax return.
The UK Government has stated that this will apply to both goods that are imported from the European Union and countries that are outside of the European Union.
In the even that there is a deal with the European Union, the most likely scenario would see that VAT stays and continues after the transition period. There may have to be changes in the law in the UK to provide legal standing for this. Categories and rates of VAT may also be subject to change over time. However, one would expect the government to attempt to minimise any potential upheaval to trade.
Traditionally, managed payroll is where you outsource your payroll process to a third party payroll provider and they ensure that your employees are paid correctly on time.
They will also ensure that you are compliant with any local, state or federal regulations in taxation and payroll. They will make any necessary deductions, inclusive of tax, student loan repayments and pensions and pay your employees.
If you outsource your payroll to a third party they will also be able to deal with any inquires or queries your employees may have.
However, increasingly managed payroll has come to mean the use of technology to manage you payroll process, whether you outsource your payroll to a third party or manage it in house.
It varies upon the services you ask and the company that provides it. However in 2017 the prices for the basic package payroll services provided by companies ranged from £25 to £200 per month.
This price will be inclusive of online access for employees, tax filing, deduction for student loans and pensions and paycheck processing as well as depositing pay into employees bank accounts.
A wide variety of functions can be handled by a payroll company: inclusive of the monitoring of employee attendance, time and sickness, ensuring correct deductions are made inclusive of taxes and pensions, as well as setting up or making any changes to direct deposit accounts.
If you have been absent from work due to illness on full pay you will receive Occupational Sick Pay (OSP).
Occupational Sick Pay (OSP) is paid as a top up to SSP (Statutory Sick Pay) so that you are able to get full pay whilst absent due to illness which will fulfill your Terms and Conditions of Employment.
Your unique payroll number will be how your payroll department distinguish between individual employees.
This can be found by contacting your payroll department or it is usually on your payslip.
When you are setting up a new employee on your companies payroll system you will need to enter their RTI (Real Time Information) Pay ID.
This will get the employee reference for your company, which in turn you will submit to HMRC.
If your employee become ill and is unable to work, they may become eligible for SSP (Statutory Sick Pay) which is currently set at £92.05 per week for a maximum of 28 weeks.
However, your organisations sick pay scheme may offer more, it is illegal to offer less.
Company sick pay schemes are also refereed to 'occupational' or 'contractual' sick pay and must be included in the employment contract.
In the UK you must provide all employees with a wage slip. A payslip can also be referred to as an itemised pay statement in legal terms, and must be provided to your employees on or before each of their pay dates.
In the event that an employee is unable to access an electronic version of their pay slip, you must produce a hard copy for them.
If you have been off of work for more than four days in a row, inclusive of non-working days, and are too ill to work, you can get Statutory Sick Pay (SSP) which is paid at £92.50 by your employer for up to 28 weeks.
A payslip must show all of the variable deductions, inclusive of National Insurance, Tax, pension deductions and student loan repayments.
As of February 2018 your payslip must also display time worked and demonstrate that your pay is appropriate and complies with the legal set minimums.
As part of your contract of employment you are entitled to be paid on time.
Moreover, in the event that your employer is consistently late in paying you whilst you are employed by them, you can follow legal procedures to ensure your right to be paid is legally enforced.
In this event it is recommended you contact the citizens advice bureau.
In the event that you do not have a company sick pay scheme, your employer will still have to pay you Statutory Sick Pay (SSP), as long as you meet the requirements.
Your employer does not have to pay it for the first three days of illness, unless, within the last eight weeks you have been paid SSP and are eligible for it still. SSP is currently paid at £92.50 per week.