After months of what can only be described as the most divisive and controversial political decision since, well, probably since the UK joined the EU common market, the Brexit deal is finally in place. Now all the noise has died down, regardless of which side of the debate you were on, the important thing is to look at what this means to you financially. If you take the details of the deal and the other Brexit related issues and crush them down, you distil a few general areas to think about. These will give you a jumping in point for how you could be affected financially.
- What is the impact on your cashflow?
Let’s start with the big question. This is without doubt the most important consideration right now. If you trade with Europe or are supplied by EU businesses, you need to consider the effect on your cashflow. There is undoubtedly going to be an impact on your bottom line. Even if freight charges are a not an issue (see below) then you are still likely to need to cover the cost of additional administration or similar.
- Are there other markets available to you, if so, are they actually viable?
If the EU market is becoming less attractive to you, then are there now other options? As the government agrees new trade deals, more markets should, in theory at least, become available for either lower cost imports or as viable export opportunities. It may be worth keeping up to speed with new deals as they are announced to look for early response opportunities if they arise. However, a word of caution on this. New markets could well mean the same unforeseen costs that now exist with the EU, so beware of unlooked for expenses and again, and admin costs will need to be considered.
- The customs duties complications
Import duty is now going to be considerably more complex. When it comes to importing goods there is a simplified customs declaration in place for the first six months which you can use (assuming you are in good standing) to ease the transition period. After that grace period the new rules will come into place and you will need to account for them in your financial planning.
- Will you have staff issues, or will it be a benefit?
The free movement of workers has now ended and this could be a problem for anyone who regularly employs overseas workers. The new standard visa system is not as simple as free movement was and workers will now need to be sponsored in most cases. There is also a minimum wage requirement on a job offer and this is coupled with an expected level of English language and education. That said, the new system could make access to specialist workforce members from a whole series of new countries as viable as Europe used to be. Overall though, the days of easy access to EU workers are gone. One last quick thought on this that could impact your work force in the coming year. The window for any EU workers to apply settled status will end in June this year. If any of your current workforce intend to settle, they should apply ASAP.
- VAT changes need to be considered.
The post Brexit changes to VAT are a little bit too complex to consider in this article so you need to speak to your accountant about how to plan for this in the long term. In brief though.
- Businesses that sell digital services and use the mini one stop shop (MOSS) system need to register in an EU state to continue to have access.
- Postponed accounting is being introduced which means you will not need to settle import VAT at port and can do so on your VAT return.
- You need to claim any EU VAT refunds ASAP. They will stop after the transitional period.
- Low value parcel shipment VAT can be settled online if you are registered with HMRCs digital system.
Finally, and possibly most importantly, you really need to drill down into your business planning and forecasts to ensure you have covered off all potential costs for Brexit. We are already hearing stories of import costs and delays escalating beyond viability and clients cancelling shipments to customers in Southern Ireland over unexpected shipping costs. While these are probably teething problems and may well settle down, the long term implications of Brexit on your cash flow and forecasting should be a matter of priority if you currently deal, or plan to deal, with the EU.
As always, call us if you think we can be of help with your accounts or financial planning.