No deal Brexit and trade
With less than six weeks now to go until Brexit, it looks increasingly likely that the UK will, at least in the short term, be leaving the EU without a deal on 29 March.
Whatever you feel personally about this, it’s important to be prepared – not only for the potential difficulties, which are dominating the news agenda, but for the opportunities too. Here are some of the ways no deal is likely to affect tax and finance:
Goods moving between the UK and the EU will be subject to customs checks, declarations, and tariffs. This is not an entirely new thing; it is what already happens with imports and exports to and from non-EU countries. In the absence of a trade agreement, goods traded with the EU will be subject to World Trade Organisation tariffs. However, the UK will also have the power to negotiate lower tariffs on imports from non-EU countries, and to negotiate free trade agreements with these countries.
If you are used to only trading with the EU, you will need to be prepared for the extra costs, paperwork and border checks, and possible supply chain hold-ups and disruption at first. Technology can do much here: for example, export paperwork can be submitted electronically before the goods even leave the factory. Once people have got used to the changes, it is reasonable to expect that things will settle down.
Businesses also have the option of applying for authorised economic operator status – an international quality mark that means you can get goods through Customs more quickly and easily. You need to apply to HMRC if you’re interested.
It is also worth pointing out that there is not, and never has been, anything except politics preventing the UK and EU governments from avoiding all this by agreeing a free trade deal. It is in EU countries’ interests as much as the UK’s for trade to continue as smoothly as possible, and it would be extremely disappointing if politicians on both sides failed to ensure this happened.
If the UK leaves the EU without an agreement, the government has said it will introduce postponed accounting for import VAT. This means that UK businesses will be able to pay import VAT on their VAT return, rather than paying it as the goods come in, for both EU and non-EU countries.
UK businesses will continue to be able to zero-rate sales of goods to EU businesses, but will not have to complete EC sales lists or Intrastat declarations – meaning less paperwork! However, you will need to keep records to prove that the goods have left the UK.
EU countries will treat goods from the UK the same as goods from other non-EU countries – so they may be subject to VAT, which may need to be paid at the border as the goods come in. This will be down to each individual country – check the rules for the country you are exporting to. A good tax accountant will be able to advise you on this.
At the moment, EU law exempts most payments of interest and royalties between linked companies in EU countries from withholding tax. This may not be the case after Brexit – the UK’s tax treaties with individual countries will apply. Again, you should check what the position is for the country in question.