Getting your business ready for Brexit
What should small businesses be doing now to get ready for Brexit? Barry Cumberlidge offers an accountant’s view on some of the key considerations for sole traders and limited companies as the UK prepares to leave the EU on 1 January 2021.
At this point in time, it’s hard to know exactly what is going to happen at the end of the transition period on 31st December 2020. Michael Gove recently stated there is a 66% chance of a deal being done, and clearly, that would give us greater certainty and be less disruptive to business.
So in the midst of this uncertainty, what do you need to consider as a small business? The answer will be determined to some extent by how much you depend on European clients and suppliers.
UK Global Tariffs & VAT
- Register for EORI number
- Audit your supply chain
- Review your European sales
- Speak to suppliers about whether they’re going to put prices up
- Consider your own prices and contracts
From 1 January 2021, all goods imported into the UK will be subject to UK Global Tariffs. Check what the tariffs are for your business here. And you’ll need an Economic Operators Registration and Identification (EORI) number to import or export goods to the EU. Register for an EORI number here and if you already have one, check that it starts with the letters ‘GB’.
If you import goods from the EU, not only will you have tariffs on imports, but you will also have to pay VAT. A real area of concern is therefore around the cash position for small businesses.
So, let’s think about that.
UK Global Tariffs on imports could rise (or fall) and you could be paying an additional 20% VAT on the purchase. For VAT registered businesses you’ll be able to reclaim that amount, but there will be a cashflow timing issue, potentially causing a huge cash drain to the business.
The price of the £
- Consider locking in your currency exchange rate
- Evaluate cash flow position
Foreign Exchange markets don’t like uncertainty and we will potentially see huge swings in the value of the pound compared to the euro and the dollar. A weak pound will make it more expensive to bring goods in, and added to VAT and Tariffs, it could be a triple blow.
The good news is that UK exporters will become more attractive if the pound is weak, but reciprocal tariffs and VAT could impact your customers.
So it’s important to consider your cash position, coupled with COVID. Could this be an issue and will you need extra cash to help?
Logjams in Kentland
- Have your suppliers prepared for potential delays at the border?
- Consider stocking up
- Find back-up suppliers
- Leave extra time to get through border control when you travel
A trade deal will most likely lead to a phasing in of new arrangements which would be a massive help to small businesses. A no-deal would have a more severe impact. Most likely the disruption at the border would be catastrophic for at least three months.
If we hit a no-deal Brexit and your supply chain relies upon importing of goods or you get paid once goods land, I think you need to start thinking about your strategy in the remaining months of 2020.
For example, if you’re a wine importer, then stocking up in December might be wise to avoid goods getting stuck in January. And if you export to Europe, try to get as many of your orders out the door before Christmas.
We’re yet to understand how much of a logjam we’re likely to face in Kent, but best to be prepared.
Employees’ right to remain
- Check employees can legally work in the UK/EU
Make sure your EU workers can continue to live and work in the UK, and your UK employees are able to work in Europe if required. Anyone who is a citizen of the EU, the EEA or Switzerland must register for settled status by June 31 2021. Click here to find out more.
Regulations & Intellectual Property
- Keep up to date with regulatory changes
- Check your IP protection
The UK has transferred all EU regulations that applied to it before Brexit into UK law. After the transition period, the UK will have the authority to change regulations. If your organisation operates in the EEA, you will need to comply with both UK and EU regulations at the end of the transition period. You will also need to check that your intellectual property is covered.
If you have any questions about the article or your accounting needs, get in touch on 0203 026 4679 or at firstname.lastname@example.org.
This article is a general summary only. It should not replace accounting advice tailored to your specific circumstances.
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