What does the end of the Brexit transition period mean for businesses?
The UK is the first and, to date, only country to formally leave the EU, after 47 years of membership. Withdrawal took place on 31 January 2020 and the Brexit transition period expires on 31 December 2020. The end of the Brexit transition period will bring about a number of changes and many businesses may not realise that they could be affected, even if they don’t currently do business in the EU.
As we do not (yet) have an EU – UK trade deal, trade, travel and freedom of movement will vary. In relation to laws, while the UK will adopt much of EU law in comparable domestic law equivalents, our status as ‘outside’ the EU will have legal repercussions. The following sections outline a few of the changes that will come into effect from 1 January 2021 in relation to trade, movement and employment of people, and commercial laws and regulations. This is not intended to be an exhaustive list of changes and we suggest that you take appropriate advice in coming weeks.
Do I need to take any action prior to 1 January 2021?
We are part of a global commercial economy and even the smallest of businesses may deal with customers or suppliers overseas. After the end of the Brexit transition period you will need an Economic Operators Registration and Identification number to moves goods in and out of the EU.
You may already have one if you trade with non-EU countries, but if it does not start with GB you will need to apply for a new one. You can register online now and with the flurry of Christmas, make sure you plan for this well in advance to prevent delay.
What will happen with trade from 1 January 2021?
Businesses have different responsibilities depending on where they are situated in the supply chain (e.g. manufacturer, importer, wholesale distributor, etc.). The way we trade with the EU and the way the EU trade with us will vary. Again, changes are subject to any deal we come to with the EU. Changes will include:
- A different tax and tariff regime, as well as changes to VAT and excise duties
- A need to comply with EU importer/exporter rules applicable to third-countries
- Timely customs checks and controls are likely, even if we were to have a zero quota / zero tariff trade deal
- Certain products such as medical devices, machinery or construction products or components of products such as chemicals will require EU certification and/or registration and will no longer be allowed to rely on a UK certification and or/ registration.
- The originating status of goods may also need to be demonstrated
What should businesses know about taxes and tariffs from 1 January 2021?
UK Global tariffs and VAT will be payable by all importers.
Even if we do secure a deal, new tariffs may also be imposed on goods and services that UK businesses export to the EU as well as other nations. Businesses that deal with non-EU countries need to ensure that the tariffs paid are not set by way of an EU negotiated deal, in which case this may also change. You may be able to reduce VAT on exports to 0%.
This is going to be an area requiring significant attention over the next few weeks. Make sure you:
- Monitor announcements about new foreign tariffs that could apply to your goods
- Review your current commercial contracts to understand your commitments and how the different Brexit outcomes may impact them
- Consider whether employing a customs agent to fill out customs declarations could be cost and time effective
- Check if you will have to register for VAT in EU countries that you work in. An accountant with EU experience will be able to advise you on this
How will Customs and Controls be conducted from 1 January 2021?
Customs rules will apply to all goods entering the customs territory of the EU from the UK or leaving that customs territory to the UK. Even if a deal is established, it is likely that there will be regulatory compliance checks and controls on exports to the EU for safety, health and other public policy purposes. Special rules and exemptions are likely to apply between Northern Ireland and the Republic of Ireland.
This means that your import or export activities may take longer and/or require additional logistical considerations such as additional storage facilities or the need to change order volumes or regularity. Activities may be further disrupted by the fact that road transport operators established in the UK will no longer benefit from the automatic right to conduct journeys and carry goods across the EU meaning additional formalities will be required on borders.
To avoid any breach of contract claims, you will need to check you contracts to know what your obligations are in advance, plan ahead and account for delays.
FREE MOVEMENT OF PEOPLE
What will happen to workers from 1 January 2021?
Who can work for UK businesses will change. UK businesses will need to identify staff who are citizens of the EU, the European Economic Area (EEA) or Switzerland as they must register for settled status to continue living and working in the UK. They will have six months after the end of the Brexit transition period (31 June 2021) to do this. This does not apply to Irish citizens living in the UK and vice versa.
A new points-based system for sponsored workers will be coming into effect which will cover EU and non-EU migrants alike.
You will also have to identify staff that may live within the EU and check whether their continuation in that jurisdiction requires action.
Will professional qualifications of workers continue to be recognised from 1 January 2021?
There will no longer be mutual recognition of professional qualifications between the UK, EEA and Switzerland. Existing decisions will remain valid but those workers who assume an EEA-based or Swiss-based role after the transition period will need to take steps to have their qualification ‘recognised’.
UK nationals, irrespective of where they acquired their qualifications, and EU citizens with qualifications acquired in the UK will need to go through the member state’s recognition process which can be more burdensome.
Where the worker is based in the UK, there will be a new UK recognition system in the new year. However, rights and privileges accorded, by virtue of the Common Travel Area, to Irish and UK citizens when in each other’s state, will be preserved.
LAWS AND REGULATION
Will EU law still apply to the UK after 1 January 2021?
EU law will no longer apply, however a new body of law called Retained EU Law will bring EU law into national law. These are very uncertain, and you must keep an eye on guidance and upcoming changes. Judgments handed down by a UK court may no longer be swiftly enforceable in the European Union due to cross-border recognition rules changing.
One area that is likely to see a big difference is data and privacy. In 2018, GDPR was the buzz word – now under that same legislation we are going to become a ‘third-country’. We do not yet know if the EU will deem the UK ‘adequate’ and so we must prepare for the additional restrictions and safeguards of data transfers. Businesses may think ‘oh this doesn’t apply to us’, but do you know where your cloud or software provider stores your data? This may change your view. Keep an eye on the ICO website.
How may contracts be impacted by the end of the Brexit transition period?
If you deal with EU customers or suppliers, you are likely to be subject to contracts and agreements. You must re-familiarise yourself with your contracts. Although it is unlikely that such agreements were made in anticipation of Brexit, there may be provisions that can help with Brexit such as price variation or costs sharing clauses. Such clauses may also serve the other party which may cause you a detriment. For example, if you are a customer, does the supplier have a right to increase their prices?
Speak to all of your suppliers and service providers about their plans for Brexit but before you do, know your rights to terminate under the contract. You should also check which court has jurisdiction under the contract and if it is silent on this point, consult a lawyer.
Will my Company be recognised in the EU from 1 January 2021?
UK incorporated companies will be third-country companies and will no longer be automatically recognised in the EU. In effect, the legal personality and limited liability of UK incorporated companies and partnerships may not be recognised by other member states, in part or at all. Subsidiaries of UK companies in the Union are, in principle, EU companies and will continue to be covered by all relevant Union and national legislation. Businesses operating in the EU will need to check this status and decide if it is necessary to incorporate in the relevant member state.
Will my intellectual property protections remain from 1 January 2021?
The UK and EU will no longer offer one another reciprocal protection for IP created by each other’s nationals and/or first published in each other’s territories – although potentially this could be resolved in any trade deal agreed.
Registered EU trade marks and Community Registered Designs will no longer cover the UK, but the UK will automatically create new comparable UK trademarks and registered designs for almost 1.4 million EU trade marks and 700,000 EU designs.
Businesses relying on community protections or using .EU domains must take steps to ensure protection and validity continue.
You should already know which of your IP rights are likely to be affected after Exit Day. Consider whether dual-filings or re-filings are necessary. Also review your IP agreements such as assignments or licenses to ensure necessary amendments are made.
If you are concerned or uncertain about how your business will be affected after the end of the Brexit transition period, contact our business team to discuss your circumstances and the advice we can provide. You can submit an enquiry using the form below, call us on 01392 256854 or email firstname.lastname@example.org.