This past year, it was proven that change is inevitable. Before the Covid-19 pandemic, preparing for Brexit was at the forefront of all business strategies as we faced pressure to strengthen and adapt our organisations to mitigate the impact of these coming changes. On 24 December 2020, the UK and EU governments settled a trade deal entitled the Trade and Cooperation Agreement (TCA) and on 31 December 2020, the Brexit transition period ended and the agreement formally came into effect. Its impact cannot be simplified into a collective summary that spans across all sectors, that is dependent on the type of organisation and its operations. However, there are some challenges that all businesses collectively need to address or at least be aware of.
How will Brexit impact your business?
There are several ways Brexit will impact the structure of your business, such as trade, postponed VAT accounting and regulation. How these laws will impact your organisation is outlined below.
While the TCA allows manufacturers to continue trading between the EU and the UK, there are compliance issues which businesses must take into consideration, such as:
- Tariffs are generally avoided on goods, but companies must complete additional paperwork and declarations when moving goods across the EU/UK border.
- There will be additional compliance costs for businesses in either completing this paperwork or assigning a customs broker to manage it.
- For goods traded between the EU and UK to benefit from being duty and quota free they must meet requirements on 'rules of origin', which authorises that the goods truly originate from the EU or the UK.
It is advised that manufacturers work closely with supply chains to ensure that they are capable of adapting to the new trading agreement. Record-keeping will be even more critical for businesses in the future than it is now. Our Business Cloud Essentials customers can capitalise on our cloud-based software solution as it provides a secure record keeping functionality that can be accessed anywhere at any time.
Postponed VAT Accounting
As expected, VAT is now payable on imports coming into the UK from Europe, the same as imports from anywhere else in the world if they’re over £135. The postponed VAT accounting system was established to avoid the negative cash flow impact on businesses that will be paying this additional VAT bill and prevents goods being held in customs until VAT is paid. This is to prevent the importer from physically paying import VAT and then reclaiming it on the subsequent VAT return, the VAT is accounted for as input and output VAT on the same return.
The result is the same but the importer will avoid the physical payment. Customers of our Financial Management Solutions (FMS) such as Exchequer and e5 that will be impacted by this change have already received communications and documentation designed to support them by advising them of best practise on how to perform these changes, whilst maximising the potential from our solutions to aid them.
As the TCA does not provide for mutual recognition between the nations, UK regulatory bodies will not be able to certify products for sale in the EU. This means UK businesses selling in the UK and EU will need to comply with two different regulatory regimes. Collaboration with supply chains will be essential in this regard as companies will need to evaluate their compliance to ensure that they are authentically placing goods on the market.
How will this impact your people?
The impact on your workforce is dependent on the individual circumstances of your staff, we’ve highlighted some of the following agreements that you should be aware of:
- The TCA includes protocol on social security coordination and largely reiterates the current EU’s regulations. However, employees should be aware that from 1 January 2021, it is only possible to be within the social security legislation of one country at a time.
- The TCA states that the UK and Member States will initially provide visa-free travel for short-term visits when travelling for purposes such as tourism, to visit friends or family or for conducting a limited variety of business trips, including attending meetings, conferences and trade fair.
- Any employers who have EU, European Economic Area (EEA) or Swiss citizens on their staff should encourage them to apply for pre-settled or settled status by the deadline which is 30 June 2021.
- The Government has published further details for the ‘points based’ immigration system the UK will use from 2021.
- The agreement ensures that EHIC cards already issued will remain valid until their expiry date and can be used in the EU. Once an EHIC card expires or if a certificate is required for the first time, the Government will instead issue a Global Health Insurance Card (GHIC) which will provide healthcare cover in the EU.
The changes introduced by Brexit and the current pandemic have forced businesses to recognise and adapt any existing operational flaws, but it also may be time for your organisation to implement changes to best support your most valuable asset, your staff. Enable your team to set goals, give instant feedback and have meaningful conversations through effective performance management. As organisations, we need to align and engage our people with clear goals and deliverables, structured conversations and real-time feedback, to ensure that amid an unpredictable period, we remain a united and resilient workforce moving forward.
Change is understandably difficult for organisations, as we navigate how Brexit will alter our existing processes it is imperative that we manage risks appropriately and to support you, the government website has published relevant articles and guides. Although 2020 has forced us to recognise the unpredictability of change, Advanced will continue to adapt as we are committed to supporting our customers in meeting these challenges.