What Brexit means for your practice
Brexit is once again on the radar of people and businesses across the UK. In a poll taken on 12 October 2020, respondents cited it as the third biggest issue facing the country (just behind health and the economy).
This is undoubtedly because 31 December 2020 marks the end of the Brexit transition period. It’s not yet fully known what will happen after this date with regard to trade between European Union (EU) countries and the UK.
This article answers frequently asked questions about Brexit that might help the transition process in your practice, based on current understanding.
What is the Brexit transition period?
Although the EU and UK continue to negotiate, they agreed upon the UK-EU Withdrawal Agreement in October 2019, which became UK law as part of the Withdrawal Agreement Act.
Among other things, this allowed for a period following Brexit during which the UK continued to apply EU law, even though it’s no longer part of the EU’s institution.
Although the transition period could’ve been extended in July 2020, the UK and EU decided not to do so
When does Brexit happen?
Brexit has already happened.
The UK officially left the EU at 11pm (BST) on 31 January 2020.
This occurrence was surprisingly low key, to the extent that some have not yet realised the Brexit date has passed. But it has and the UK is now in the transition period, which ends on 31 December 2020.
What is no-deal Brexit?
There have been two potential no-deal outcomes since the UK voted to leave the EU. The first was in the run up to the Brexit date of 31 January 2020. This was also known as a hard Brexit.
However, a withdrawal agreement was put in place, and this outcome was averted. Now the transition period is ending, the prospect of another kind of no-deal outcome has arisen.
In this scenario, and purely from a business perspective, the UK will not have reached trade agreements with the EU by the end of the transition period on 31 December 2020, meaning higher trade tariffs might apply.
But if no agreement can be reached by 31 December 2020 then a no-deal outcome will occur.
However, a free trade agreement will mean some of the trade friction points relating to tax, customs, the movement of goods and people may be eased or not be required.
Whichever outcome occurs, significant changes for businesses will be required immediately as of 31 December 2020.
Postponed VAT accounting for imports following the end of the transition period
If you import goods from anywhere outside GB (or possibly the UK depending on the final rules) after the end of the transition period, and those goods are for use in your business, you can use postponed VAT accounting to avoid the requirement to pay import VAT immediately upon the goods entering the UK (e.g. at the port of entry).
With this, you declare the import VAT on your VAT Return. This avoids paying VAT and then reclaiming it later.
There’s no need to get authorisation from HMRC to use postponed VAT accounting, but you’ll need to include your EORI and VAT number on the customs declarations.
Note that different rules will apply to VAT on goods imports not exceeding £135 in value.
Consignments under £135 will no longer attract import VAT and instead supply VAT will be applied at point of sale by the seller.
If being sold to a consumer or non-VAT-registered business, the seller should charge UK VAT and will therefore need to have registered with HMRC and account for UK VAT.
If being sold to a VAT-registered business then the UK VAT will be reverse charged to the customer. This will then lead to the goods clearing customs quickly.
Are Sage products ready for Brexit?
Sage has project teams who are focusing on preparing for implementations influenced by Brexit, whatever the outcome.
These include a programme of work designed to ensure all areas of our business and products will be ready for Brexit, irrespective of whether a free trade agreement is reached between the UK and EU.
Sage has always placed a high level of importance on legal compliance and customers can trust that Sage will address Brexit with the same attention and focus as is customary.
There’s no doubt that preparing your practice for the end of the transition period continues to be difficult due to the current uncertainty.
However, as we’ve shown here, there’s a lot of information available to help you prepare. Making good use of it can mean the difference between being ready for changes and being left behind.
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