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Brexit business impact assessment

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24th Jun 2016
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The UK’s unprecedented vote to leave the European Union has left the business community scrambling to make sense of the trading environment left behind by the scorched earth of Brexit.

Reacting to the vote Carolyn Fairbairn, director-general of the CBI said: “The urgent priority now is to reassure the markets. We need strong and calm leadership from the government, working with the Bank of England, to shore up confidence and stability in the economy.”

ICAEW chief Michael Izza was less reassured, stating that the negotiation process “will create instability in business and the accountancy profession.”

On the small business side Mike Cherry, Chairman of the FSB called on the government for clarity on what the decision meant for business, including clarifying access to the single market and the free movement of people and trade.

“Nearly a quarter of FSB members export”, said Cherry, “with the majority exporting to the single market. Access to the single market means access to 500 million potential consumers, more than 26 million businesses and is worth 11 trillion euros.”

While the general population decided to dispense with expert opinion when it came to voting time, AccountingWEB has sought out a number of commentators to get to grips with the potential impact on business.

Tax

Kevin Nicholson, head of tax at PwC: “Brexit will undoubtedly affect how people and businesses are taxed, and in the short term predicted that uncertainty on future tax rules will create challenges for businesses as they plan ahead.

“The UK will now have more scope to use tax to help particular industries, regions, and groups of people. Great care will be needed to prevent unintended consequences as legislation from Brussels is removed. Longer term, there will be fewer layers of legislation, which should simplify the tax system for businesses large and small.”

For more detailed discussion of the tax issues covered here, also see The tax implications post-Brexit.

VAT

Kevin Hall, senior consultant, Gabelle: “One thing that’s certain is that leaving the EU will require a UK legal basis for VAT after the UK exits the EU. It is really only clear at this stage that transactions with other EU countries will be affected.

“On exit being formalised, it is expected that goods bought into the UK from an EU country will be subject to import VAT and import duty. Goods exported from the UK to an EU country will be subject to import VAT and import duty in the EU country. It will be interesting to see whether the UK sees any need to increase the paperwork and delays associated with imports from EU countries.”

Employment law and freedom of movement

Niki Walker from TaylorWessing: “It is highly unlikely that any UK government would seek to fully repeal (or even substantially repeal) existing employment laws which implement EU minimum requirements.

“Much of the employment protection which flows from Europe reflects accepted standards of good employee relations practices. In this respect, they can almost be considered fundamental rights rather than administrative rules which employers have to comply with.”

Nick Goode, EVP product management, Sage: “On free movement of staff, UK Employers of EU workers (and EU employers of UK workers) need to prepare for short implementation windows once the inevitable new regulations are in place.”

Also see Brexit and employment law – watch this space.

VAT MOSS

According to digital law expert and AccountingWEB contributor Heather Burns UK retailers will still be obliged to collect European VAT based on the place of supply of their customers, as they do now, but they will no longer have access to the MOSS portal.

“This means UK retailers will have to register with the tax authority of each individual member state where they make any sales in order to remit their collected VAT”, said Burns. “All those tiny payments on tiny sales will become 27 times more complicated.”

Financial reporting

The message from the Financial Reporting Council remains “business as usual”. EU laws and directives governing UK accounting have been written into UK company law, and that framework won't be changing for the foreseeable future. The Companies Act 2006 was tweaked to make small companies to adopt FRS 105 in place of FRSSE for accounting periods beginning on or after 1 January 2016. More legal changes are likely to accommodate HMRC's making tax digital project and apart from other legislative distractions arising from Brexit preparations, there is nothing to stop moves to introduce financial reporting reforms that distance the UK from the European framework. More details are available in Brexit poses new questions for standards-setters.

Insolvency

Leaving the EU will have a major impact on the way corporate insolvency works in the UK, according to Andrew Tate, president of UK insolvency trade body R3. “The UK’s insolvency regime does not exist in a vacuum”, said Tate. “It is entwined with rules on employment, tax, property, and more; and all of these are linked with European rules”.

One key change is that it could become much harder to retrieve assets on behalf of creditors from across Europe. With some exceptions, once the UK leaves, a UK insolvency practitioner’s powers may no longer be automatically recognised elsewhere in Europe, nor will UK insolvency proceedings enjoy automatic recognition. “New deals will need to be negotiated”, said Tate.

Data protection and cyber security

A spokesman from the Information Commissioner's Office (ICO) commented: “If the UK is not part of the EU, then upcoming EU reforms to data protection law would not directly apply to the UK. But if the UK wants to trade with the Single Market on equal terms we would have to prove 'adequacy' - in other words UK data protection standards would have to be equivalent to the EU's General Data Protection Regulation framework starting in 2018.

“With so many businesses and services operating across borders, international consistency around data protection laws and rights is crucial both to businesses and organisations and to consumers and citizens.”

Energy prices

Phil Foster, managing director of Love Energy Savings said: “One of the biggest expenditures for small businesses will be their energy, and the UK public have been warned recently that leaving the EU could have negative consequences on our bills.

“With the possibility of rising energy prices, small business owners should look to cut back wherever they can. This can include introducing some energy efficiency policies for your office, whether that’s greener LED lightbulbs, more natural light or adding movement detectors to turn off your lights automatically.”

Will leaving the EU have an effect on your business? And is it likely to be positive or negative?

Replies (2)

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By Fenella
30th Jun 2016 12:04

It depends very much on your sector. The core of our business is assisting local authorities and NGOs with interpreting and applying certain EU Directives in a very specialised field (mostly employing those who used to work for the LAs and NGOs before cuts got rid of them). Although nothing will change for at least two years we cannot plan anything, because we don't know if the directives will essentially remain, be changed a bit or abolished. In the meantime no-one in the sector is recruiting or investing in anything more substantial than a box of paperclips, and those who are able (mostly those without ties, ie the younger ones) are making plans to remove themselves either to Europe while they can or even farther afield. As a scheme to pull the guts out of a nation, Top Job.

Thanks (2)
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By EasyBrexit
04th Jul 2016 21:28

Hello everyone,

We are currently setting up an information system that will assist firms through the next few years of the Brexit. You can leave your email here if you are interested and we will get back to you once everything is in place in the coming couple of weeks."

http://easybrexit.com/

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