Brexit

The Brexit vote in 2016 brought about significant shifts in UK politics. It is likely to bring about significant shifts in UK economy as well. Less than a year before the UK leaves EU institutions and about 2 years before we leave the Single Market, there are still a great many unknowns concerning customs’ arraignment if any, mutual access to markets and cross-border service provisions. This uncertainty affects directly all businesses that export or import from the EU – about 600’000 individual companies, approximately 10% of all businesses in the country. The Brexit process will directly impact their profits or even their solvency. The Brexit process will directly impact their profits or even their solvency.

Before all the i-s are dotted and all the t-s are crossed, we are likely to see great deal of public bargaining, brinkmanship and mutual threats from both negotiating teams. This will make many managers and business owners up and down the country uneasy about their future prospects. For them, the prudent course of action is to prepare for all eventualities.

We are here to help SMEs plan their own backstop scenarios. Our extensive knowledge of tax and compliance regulations across the EU makes us the perfect assistant to help SMEs draw comprehensive and detailed action plans in case of adverse economic effects on their respective industries.

We work with each of our customers to tailor their plan to the particular needs of their business. We analyse their individual circumstances and provide them with options that describe in detail the different actions they might take, their effects and implementation challenges.

For all the businesses that will be effected by the Brexit process we have one recommendation – be prepared for all eventualities.

Solutions for goods

The 28 member countries of the Customs Union form a single territory for customs purposes. This means that:

• no customs duties are paid on goods moving between EU Member States
• all Member States apply common customs tariffs for goods imported from outside the EU
• goods, which have been legally imported, can circulate throughout the EU with no further customs checks

The UK’s decision to leave this structure will have a number of possible implications for both export and import of goods from the Continent. UK businesses planning to continue their trading practices need to prepare for a number of requirement such as:

• Import restrictions
• Technical requirements. Standardization and conformity assessment procedures cover both the design and the production phase of products in a variety of ways: internal control of production, full quality assurance, etc. For goods from third countries (such as the UK after 2021) each of the above needs to be independently certified by a certifying authority. Mutual recognition agreements exist between the EU and certain non-EU countries which are on a comparable level of technical development and have a compatible approach to conformity assessment. It remains to be seen if that will be the case for all industry sectors in the UK.
• Marketing standards. EU marketing standards for agricultural and fishery products that are supplied fresh to the consumer are designed to guarantee quality. Under the common marketing system for agricultural products, the requirements vary by product depending on aspects such as freshness, size, quality, presentation, tolerances, etc. Marketing standards for fishery products classify them by quality, size or weight, packing, presentation and labelling.
• Environmental and sanitary requirements. The EU/UK future border transit must also comply with various other requirements for environmental, sanitary and phytosanitary compliance (like chlorinated chickens, for instance). Appropriate testing bodies and agencies are involved and obtaining the needed documentation is usually a time-consuming and resource-intensive endeavor.

We stand ready to help our clients in preparing their plans for various customs arraignments on both sides of the border. Planning ahead is key for your business success and we recommend that you start as soon as possible.

Solutions for services

In 2017 UK export of services to the EU totalled over £100 billion, out of which £40 billion are non-financial services. This section will map some of the issues that service providers should consider in a post-Brexit environment.

• Right to offer the service (licensing requirements). In many Member States different conditions apply to third-country companies that provide services in one and the same industry field. Sometime special licensing or a joint venture with a local partner is required. In specific cases the service supplier is obligated to create his/her own subsidiary in the Member State. While the UK government has stated it wants to streamline the service provision, it is still unclear what the terms of that streamlining will be.
• Free movement of people. Naturally, services are provided by people and if those people can’t move freely, the service provision becomes very complicated. The UK government has reiterated its resolve to end free movement of people, but its aims at an ambitious agreement with the EU on services. Still, the right to work in the EU/UK for citizens of third countries (that are not fully part of the Single Market) is quite long and difficult to obtain and may be subject to quotas or other national restrictions.
• Mutual recognition of qualifications. This is an important element of service provision, as in numerous cases the service may be legally provided by qualified persons only. There is no clarity on the Brexit terms in this area as well. Should any divergence appear in the final settlement, the ways to formally recognize qualification in different member states may take up to 6 months and involve a number of administrative steps.
• Social security payments. Social security coordination across the is likely to be a contested issue for short term cross-border workers. Posting employees will likely require tax registration or other administrative steps and UK companies should be prepared for the transition.
• Taxation is also an important aspect to consider in cross-border situations. Direct corporate and personal taxation may be due in the country of the service provider, while indirect taxation (VAT ) will be due in the country of provision. Registration for VAT and other dues may require special tax representation or administrative burdens. We would recommend, if that is necessary, that companies apply for tax registration well beforehand.
• Professional insurance and other requirements. Depending on the industry, professional liability insurance may be needed for certain service provisions. As the negotiations are still ongoing, it is not clear if insurance products from the UK may be used in the rest of Europe after Brexit. Still, careful planning is always the prudent tactic.

We stand ready to help our clients in preparing their plans for various service provision arraignments on both sides of the border. Planning ahead is key for your business success and we recommend that you start as soon as possible.