Top 10 ways to prepare your business for Brexit

First published 06 November 2018 • Updated 25 June 2019

The UK is scheduled to leave the EU on 31 October 2019. The effects on your business could be far-reaching and in many cases are still uncertain. This summary of what we know so far should help you to prepare for the switch. Article by Nick Green.Brexit EU border

How will Brexit affect your business? Leaving the EU has many implications for businesses of every size, relating to supply chains, personnel, exports and imports, product manufacture, in-house expertise, accounting and various other potential issues. The extent to which you are affected will depend on how and where you do most of your business, but all UK businesses are likely to experience some impact, whether or not they trade directly with the EU.

The terms of the UK’s future relationship with the EU are still uncertain, with Parliament thus far refusing to pass the Withdrawal Agreement negotiated by Theresa May. The alternatives being discussed currently include:

  1. Renegotiating the Withdrawal Agreement to something Parliament will accept
  2. A General Election to try and create a majority for the Withdrawal Agreement
  3. Leaving the EU without an agreement ('No deal')
  4. Putting the Withdrawal Agreement to the people in a new referendum (versus remaining in the EU)
  5. Revoking Article 50 to keep the UK in the EU.

The EU has repeatedly stated that the Withdrawal Agreement is not up for renegotiation, which rules out option 1. Option 3 (No Deal) is predicted to cause huge upheaval, and Parliament has insisted that it will not allow this to happen. The government itself has ruled out options 4 and 5 (though this does not mean that they can't happen somehow). Currently the most likely scenario is therefore option 2 - a General Election leading to a new vote on the Withdrawal Agreement.

If the Withdrawal Agreement fails to pass, then the UK leaves the EU automatically on 31 October with no deal. It is however likely that the government would ask for a further extension from the EU, perhaps on the condition that they offer the British people a new referendum so they can vote on the Withdrawal Agreement (option 4).

In summary, then, the scenarios for Halloween boil down to two possibilities: leaving under the Withdrawal Agreement, or being still in the EU (for now). Consider how the following points might relate to your own activities, to ensure you’re as Brexit-ready as possible by November.

  1. Currency shifts

The initial vote to leave the EU caused a sharp drop in the value of the pound against the euro in particular. No deal would have a similar effect (but is unlikely to be allowed to happen). Leaving under the Withdrawal Agreement, however, might finally raise and stabilise the pound once again. A strong pound can be good for imports, but can make it less profitable to export. Ask yourself how a stronger pound might affect your overseas business, and see if you can arrange to be paid in sterling (rather than euros) if necessary.

  1. Your people

Do you have EU staff in your workforce? If they’ve been in the UK for at least five years by 31 December 2020 then they can apply for UK Settled Status. If not, they can apply for PreSettled Status until they qualify. You should also check the government’s official guidance on their status.

Further changes are expected to the UK’s immigration regime, which may affect your future staffing plans. If you or your staff travel regularly in the EU for business purposes, you can check the visa requirements for each country here.

  1. Your supply chains and exports

Being outside the EU may disrupt supply chains, but if the UK leaves under the Withdrawal Agreement then trade should continue without too much friction at least initially. If you import anything from the continent (or indeed anything that comes via UK ports) then you may in the longer term face increased delays at the border. Consider how time-sensitive your supply chains are and see if you need to make new arrangements with your suppliers. You may also want to invest in greater storage space so you can stockpile materials if necessary.

Leaving the EU may eventually require UK exporters to make customs declarations. It may be useful to have a member of staff who is trained in the areas of non-EU customs and export. A good accountant can also help you in this area. The government has also produced an information pack that includes tips on customs arrangements in the event of a no-deal Brexit.

  1. Tariffs

It is possible that tariffs may apply between the UK and the EU post-Brexit. In essence, this would make it more expensive for you to buy certain items from the EU, and could also make it more expensive for customers in the EU to buy your product. To plan for this contingency, make sure you know the HS codes and the EU MFN (‘Most Favoured Nation’) tariff applicable for your product. Now you can work out what impact this tariff might have on your sale price in the EU, and estimate the effect on your business model.

  1. Rules of Origin

Assuming that a deal is done to give UK-sourced products favourable treatment in the EU, you will still need to comply with Rules of Origin legislation, to prove that yours really is a UK product. This means you must be able to show that your product is at least 50-55 per cent sourced in the UK. If some of your product comes via third-party suppliers, make sure to get proof from them as to the origins of their materials.

  1. Non-EU trade

Currently much of the UK’s non-EU trade is governed by trade agreements made via the EU. At present you may therefore be importing or exporting from non-EU countries at preferential duty rates as a result of these deals. The UK government has said it will attempt to ‘roll over’ such deals, but there is the possibility that the terms may have to be renegotiated and may change. EU firms have already been advised to source from non-UK firms if they want to continue to benefit from lower tariffs, so if you are currently a supplier to an EU firm that exports to a country with which there is such an agreement, be ready to have your position challenged.

  1. VAT issues

The government’s stated aim is to keep VAT procedures as close as possible to how they are now post-Brexit. However, if there is no deal, it will introduce ‘postponed accounting’ for import VAT on goods brought into the UK. This means you’ll be able to account for import VAT on your VAT return, rather than paying import VAT at the border. This will apply to imports both from the EU and from non-EU countries.

Furthermore, if you hold stock in any EU country to supply EU customers, you’ll need to register for VAT in that country. For more information, see the government’s technical notice on VAT.

  1. EU regulations

The government’s aim is to keep the current system for obtaining licences to trade with the EU. However, post-Brexit you may find yourself in a situation where you are regulated by separate UK and EU regulators. It may be possible for the UK to stay in the European standards system, but as a precaution you should ensure that your databases of relevant standards are up to date, to minimise any upheaval.

  1. Contracts

If you have contracts in place across EU borders then you may have to renegotiate or at least reword them. All references to the EU should be replaced, as these could result in legal disputes further down the line. Most importantly, you should clarify your terms for trade across EU borders now that you are an international exporter / importer.

  1. Intellectual property

If you own any trademarks, patents, copyrights, designs or other intellectual property (IP) rights that are registered in the EU, these may be affected by Brexit, particularly in the event of no deal. The government has prepared this technical notice on intellectual property in a no-deal scenario. It is advisable to contact a solicitor or other IP rights specialist to ensure you have the necessary level of protection in place.

Brexit is a time of considerable uncertainty for all UK businesses, but this checklist should help you to prepare for a range of possible scenarios.

Let us match you to your
perfect accountant

About the author
Nick Green
Nick Green
Nick Green is a financial journalist writing for Unbiased.co.uk, the site that has helped over 10 million people find financial, business and legal advice. Nick has been writing professionally on money and business topics for over 15 years, and has previously written for leading accountancy firms PKF and BDO.