Don't sweat the Brexit business impact

Chris Andreou

April 21, 2021

brexit business impact guide
Small Business Accounting Guide Guide

Free Download: Small Business Accounting Guide

Download Now ↓
Business Resources

Introduction

This article is updated regularly as events unfold.

Enough drama and politics, in practical terms, what is actually going to happen? 

Accurately predicting the future has never been easy, and the people who claim to know how to do it usually get it wrong - often due to the methodologies they have to work within. 

The task gets even more convoluted with a large geopolitical development like Brexit: clear waters are muddied by personal political agendas and few people really understand things like macroeconomics, grand strategy or the development of purpose which fits history together.

We're not going to explain any of that here, where we just focus on the practicalities of the process: those legislative and business factors which are already in position. 

The big question is whether Brexit will tank the UK economy. The short answer is no, because of cui bono, or those who stand to benefit.

The little questions are: to what extent will Brexit inconvenience you in your business and personal life? And the answer to that one is 'not much'.

Let's look at the actual structural changes that Brexit will result in as we piece together an apolitical, non-sensationalist picture of what is really going on.

Singapore on Thames

The tax justice network has done an excellent job of thoroughly investigating the potential which Brexit holds for the development of Britain's financial sector.

As they note:

                    "Senior government ministers have been signalling the Singapore-on-Thames development strategy since January 2017, when Prime Minister May and her                       Chancellor Philip Hammond both flagged it up as a potential route."

Such a set of arrangements would by no means be easy to negotiate, and even the preliminaries have proven problematic.

A variety of views currently prevail as to the effect of Brexit on the UK's financial sector. Both academic studies and Deutsche bank's CEO do not think that Brexit will diminish the importance of the City of London as a global financial hub.

In every crisis there is also opportunity, and without EU oversight the potential definitely exists for the UK to reinvent itself in much the same way as the USA did with their FATCA legislation. Suggesting that this might well have been the plan from before the start at some level should of course be understood as pure speculation. It will, however, happen.

Where have UK banking jobs moved to?
Where have UK banking jobs moved to?

Small Business Accounting Guide

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Small Business Accounting Guide

Current state of play

Immediately following the referendum, it was estimated that 75,000 banking jobs would be moved to the EU, primarily to Paris and Frankfurt. In practice, as the BBC discovered, hundreds of banking jobs have been moved, but hundreds is not thousands.

Bloomberg has compiled an ongoing tracker showing which firms and sectors have so far been affected and how.

According to some estimates, Brexit has already resulted in nearly 500,000 jobs lost in the UK due to downsizing and companies moving overseas.

Business investment: no marked downwards trend

Business investment overall has been stagnant since before the referendum:

Business investment in the UK

A more detailed analysis by Bloom et al. reveals that Brexit has affected business investment, but it has done so in a statistically significant way only for businesses whose executives regard Brexit as one of the top three sources of uncertainty they are facing:

Brexit's influence on investment growth in UK businesses
Brexit's influence on investment growth in UK businesses

The majority of the effects in this appear to have been temporary, and due to the more nebulous factor of business confidence rather than hard structural reasons. It is an overextension to say that Brexit itself has already produced a marked departure from trend in business investment.

International trade

In the event of a no deal Brexit, new trade agreements will have to be negotiated by the UK on the basis of WTO and GATT rules. The UK is not permitted to negotiate any such agreements prior to Brexit.

It is estimated that such agreements will take between two to 10 years to negotiate.

In practice, in the short term, it is likely that the UK will continue to trade with the EU states and other countries on the basis of the WTO schedules from when the UK was an EU member.

Different scenarios are still in play, and these were the basis for the different GDP projections in the government's 2018 long-term analysis of the British economy:

UK long-term GDP impacts under different scenarios
UK long-term GDP impacts under different scenarios

These effects are likely to be more than offset by the proposals for Singapore on Thames mentioned above which are currently "still being investigated".

Small Business Accounting Guide

What's Inside:

  • When and why you may want to register a Limited Company
  • Advantages and disadvantages of a Limited company
  • Limited company alternatives
  • When to register for VAT
  • Advantages and disadvantages of VAT
  • How to take money out of your company
  • Dividend tax rates
  • Limited company expenses & corporation tax
  • Annual accounts and deadlines
  • Confirmation statements and deadlines
  • Self Assessment tax returns
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Small Business Accounting Guide

What's Inside:

  • When and why you may want to register a Limited Company
  • Advantages and disadvantages of a Limited company
  • Limited company alternatives
  • When to register for VAT
  • Advantages and disadvantages of VAT
  • How to take money out of your company
  • Dividend tax rates
  • Limited company expenses & corporation tax
  • Annual accounts and deadlines
  • Confirmation statements and deadlines
  • Self Assessment tax returns

Legislative and regulatory context: only tiny changes

The European Union (Withdrawal) Act 2018 aims to incorporate existing EU laws within British domestic legislation, whilst leaving their provisions unchanged.

Only two real changes will be required of British domestic legal structure. 

Firstly, the governing or regulatory bodies referred to in the legal structure will have to be replaced by their corresponding domestic counterparts. For example, the European Court of Justice will no longer have jurisdiction over Britain.

Secondly, legislation relating to VAT and import and export duties will have to change as reciprocal agreements may no longer be in place, or will be in place to a lesser extent and according to a different set of conditions.

Business administrative procedure

With a deal or without one, business administration will be affected by Brexit.

Once the UK leaves the EU, EU institutions will have no jurisdiction within the UK. Whilst the majority of EU law has been incorporated into British legal statute, different institutions will be responsible for administering those laws.

Areas which will be affected include:

If your business is in a field or industry where extensive changes will be required then you have probably already done your own Brexit impact assessment. Should you wish to review this in the light of the latest developments, TechUK has an extensive list of what will be involved in specific industry sectors.

If you currently employ EU nationals in the UK, then you need to ensure they apply for settled or pre-settled status. They will be eligible if they started living here before the UK leaves the EU without a deal, or by December 2020 in the event a deal is agreed.

Tax and VAT


If you currently receive dividends, interest or royalty payments from companies within the EU then post-Brexit you will have to rely on individual tax treaties for relief. The UK does already have these with the EU27 nations, but the precise terms are different in each case.

In the event of a no deal Brexit:

  • You will still be able to claim VAT refunds from the EU27 countries, but will have to use the procedures already in place for non-EU businesses.
  • The EU VAT refund system would no longer be available. HMRC have said they are developing a parallel system to list UK VAT numbers. UK users would still be able to access the online EU VAT number validation service, but UK VAT numbers will no longer be held within it.
  • Goods imported from the EU will be subject to the same rules and tariffs currently imposed on non-EU imports.
  • Low Value Consignment Relief (LVCR) will be eradicated on all parcels entering the UK, on which VAT will have to be paid.

HMRC has already made preparations for dealing with VAT in the event of a no deal Brexit.

The net effect

Bar a few administrative hurdles, not much will change overall by the looks of it. There certainly seems to be a lot less reason to panic than ordinary press reports would have you believe.

At Forma, we provide everything you need to get started as a freelancer, contractor or small business owner. If you need business advice or guidance in relation to Brexit outcomes, planning or mitigation strategies please get in touch with us here.

Get Free Advice from an Accountant

Book a free 30 minute call with an accountant. We'll help walk through setting up your business, switching accountant or any of your tax queries. All our accounting packages come with a free 30 day trial.

Read More Guides below:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
hiring employee guide
Featured Article

10 new business obligations when hiring your first employee

Here is what you need to know when hiring your first employee

Read more
Post-Brexit Guide: Importing from EU to the UK Guide

Post-Brexit Guide: Importing from EU to the UK

Ecommerce businesses haven't had the easiest time navigating the post-Brexit changes, to say the least. You've had to stay up-to-date on changes to the UK's customs landscape and VAT, and figure out the steps you need to take to adhere to new measures.

To help you along, we've provided an overview of the customs procedures for importing goods from the EU to the UK below.

Bear in mind that this is a general guide, and isn't a substitute for specific advice. If you need further information about VAT, feel free to reach out to our tax consultants at Forma.

Obtain an EORI number

Businesses will now require an EORI number-or Economic Operators Registration and Identification number-to import goods into the UK.

You'll need to check the type of EORI number you need. Depending on the location you import from or export to, you may require more than one EORI number.

If you're based in the UK, you should obtain an EORI number that begins with GB. If you already have an EORI number that doesn't with GB, you'll have to apply for a GB EORI number. If you're moving goods to or from Northern Ireland, you'll need to obtain an EORI number that begins with XI. Do note that you can't apply for an XI EORI number, unless you already have a GB EORI number.

If you need to apply for an EORI number, bear in mind that it can take up to one week for the application to be completed.

Find out if the post-Brexit changes regarding import VAT apply to your business

Following Brexit, new VAT rules relating to imports, exports, the EU VAT refund system and more have been established.

We've summarised the key changes you need to know if you're importing into the UK in our VAT guide for ecommerce businesses. These include:

  • Abolition of the Low Value Consignment Relief (LVCR)
  • Duty deferment account
  • Introduction of the £135 threshold
  • Introduction of the postponed VAT accounting.

Do note that the postponed VAT accounting is mandatory if you choose to defer the submission of customs declarations. We'll run through the details of completing your import declarations below.

Check that the business sending you goods is able to export to the UK

You need to ensure that the business sending you goods has all the necessary steps required to export to the UK. It includes:

  • Making an export declaration in their country
  • Obtaining the required EU licences or certificates
  • Having an EU EORI number
  • Having a statement of origin
  • Having a commercial invoice
  • Having a packing list

Additional resources:

Preferential tariffs and the rules of origin

The UK and EU have agreed on a free trade agreement, which came into force on 1 January 2021.

For businesses that export and import between the UK and EU, this has an important implication: the agreement provides businesses with customs duty and quota-free access to the respective markets, provided that the rules of origin are met.

To find out if you can claim a preferential rate of duty, you need to check if your goods meet the rules of origin. If the goods meet the rules, you'll need to obtain a proof of origin. The type of proof required will vary depending on the type of goods you have, where it is imported from or where the goods will be exported to.

You should also check if you're able to pay a lower rate of duty, or delay paying duty.

Additional resources:

Applying for a duty deferment account

A duty deferment account lets you delay paying customs charges such as customs duties, excise duties and import VAT (if you're not using the postponed VAT accounting system). You'll be able to make monthly payment through Direct Debit, rather than paying for individual consignments immediately upon import.

If you're importing goods on a regular basis, making monthly payments will likely be a more convenient option. There are also instances where applying for a duty deferment account is mandatory, such as when you're using the simplified frontier declaration system

Do note that the new rules for duty deferment will apply in Great Britain. While obtaining a financial guarantee was a requirement previously, businesses now have the option of applying for a guarantee waiver for their account.

Additional resources:

Import licences and certificates

Depending on the type of goods you import, you may need to obtain an import licence or certificate.

Commodity codes

Use HMRC's Trade Tariff tool to find the right commodity code for the goods you're importing.

Work out the value of your goods

When you complete your import declaration, you're required to indicate the value of your goods. This is required for the calculation of the duty and VAT you need to pay, as well as for trade statistics.

Read HMRC's guidance to learn about the different methods you can use to work out the value of your goods.

Completing your import declarations

You'll need to decide how you'll complete your import declarations.

You have the option of either completing the import declarations on your own, or through using customs intermediaries such as freight forwarders, fast parcel operators and customs agents or brokers.

Due to the complexity of the procedures, using an intermediary is the recommended option for businesses. This HMRC guide provides further instructions on steps you need to take.

If you choose to complete import declarations on your own, there are a few important things you need to know:

  • Deferring import declarations until 30 June 2021: From January 2021 till 30 June 2021, customs declarations may be deferred for imported goods from the EU. Customs payments may also be deferred until the declaration is submitted. Do note that there are exceptions (such as if you're importing controlled goods) and qualifying conditions (for instance, you'll need to be authorised by HMRC to use the simplified declaration procedure). Find out more on the HMRC guide.
  • Using the simplified declaration procedure (SDP): Depending on factors like the type of goods you're importing, you may be able use the simplified declaration procedure. See the HMRC guide for further guidance on what you need to, including instructions on how to check if you're able to use the SDP.
  • Registering for the CHIEF system: CHIEF refers to the government's Customs Handling of Import and Export Freight service. You'll need to be registered for the CHIEF system, and use software that's compatible with CHIEF. While the CHIEF service is scheduled to be replaced by the Customs Declaration Service in the future, it remains in use for the time being.

Additional resources:

Review Incoterms

Depending on the choice of Incoterms used in a contract, the buyer and seller will have different customs duty responsibilities. In light of the post-Brexit changes, you need to review your contracts to check if updates should be made to your contract terms and Incoterms.

Additional resources:

Intrastat declarations

If you're a VAT-registered business, you may need to submit monthly Intrastat returns on ‘arrivals' (goods imported from VAT-registered suppliers in EU member states) if the value of goods exceed the stipulated annual thresholds:

  • Your business receives more than £1.5 million worth of goods from the EU in any calendar year
  • Your business moves more than £250,000 worth of goods to the EU from Northern Ireland in any calendar year

If the conditions above apply, submitting Intrastat declaration is required:

  • For the rest of 2021, if you're importing into Great Britain from the EU
  • Until the end of the NI Protocol, if you're importing into Northern Ireland from the EU

Additional resources:

Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
How will ecommerce businesses be impacted by the Brexit trade deal? Guide

How will ecommerce businesses be impacted by the Brexit trade deal?

Here's a brief summary of the ways in which ecommerce businesses will be impacted:

  • Businesses will have to abide by the new import and export rules. We've covered the VAT changes impacting ecommerce businesses in greater detail in our guide.
  • Businesses may face additional paperwork and customs checks.
  • These changes will impact other aspects of your business, such as your supply chain, fulfillment process and pricing. Additional checks may mean a delay in shipping, while the new VAT changes will lead to a rise in costs. As such, businesses may need to decide who will bear the burden of the increased costs, and to assess if revising their prices is necessary.
  • UK citizens and companies established solely in the UK will no longer be eligible to hold .eu domains. This will likely result in additional costs incurred, as business purchase new domains or undertake the necessary measures to demonstrate compliance with the .eu regulatory framework.
Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
How Will Brexit Affect Contractors and Independent Consultants Guide

How Will Brexit Affect Contractors and Independent Consultants

The United Kingdom left the European Union on 31 January 2020. In 2020, the EU and the UK reached an agreement on their new partnership. It sets out the rules that apply between the EU and the UK as of 1 January 2021.

The rules cover aspects such as travel and border controls, trade in services, trade in goods, fair competition, social security, the transfer of personal data and more-a number of which may significantly impact contractors and independent consultants working in Europe and the UK.

In our article, we take a closer look at the key areas in which contractors and consultants will be affected:

Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Post-Brexit Guide: Exporting From UK to the EU Guide

Post-Brexit Guide: Exporting From UK to the EU

Ecommerce businesses haven't had the easiest time navigating the post-Brexit changes, to say the least. You've had to stay up-to-date on changes to the UK's customs landscape and VAT, and figure out the steps you need to take to adhere to new measures.

To help you along, we've provided an overview of the customs procedures for exporting goods from the UK to the EU below.

Bear in mind that this is a general guide, and isn't a substitute for specific advice. If you need further information about VAT, feel free to reach out to our tax consultants at Forma.

Obtain an EORI number

Businesses will require a UK EORI number-this starts with either GB or XI-to export goods out of the UK. You'll also have to obtain the EU EORI number of the business you're exporting to in the EU.

If you're transporting goods to your warehouse in the EU, you'll need to obtain an EU EORI number.

If you need to apply for an EORI number, bear in mind that it can take up to one week for the application to be completed.

Getting ready for exporting your goods

There are are few things you'll need to check:

Find out if the post-Brexit changes regarding export VAT apply to your business

Following Brexit, new VAT rules relating to imports, exports, the EU VAT refund system and more have been established.

We've summarised the key updates you need to know if you're exporting from the UK in our VAT guide for ecommerce businesses. These include:

  • EC Sales Lists are no longer required for VAT-registered UK businesses supplying goods to VAT-registered customers in the EU
  • Abolition of the distance selling thresholds
  • The UK remains in the Common Transit Convention (CTC)
  • VAT-registered UK businesses are still able to zero-rate sales of goods to EU businesses, provided that certain conditions are met. Different conditions will apply, depending on whether you're exporting directly (where the goods are exported using your own vehicle, or through a company you employ directly) or indirectly (the collection of your goods is handled by your customer). See HMRC's guidance on VAT for further details.

Check the rules for exporting your goods

Depending on the type of goods you export, there may be rules, restrictions, tax or duty rates that apply, or additional exporting documents that are required.

You will also need to check:

Additional resources:

  • Use HMRC's online service to check the duties and customs procedures for exporting

Check that the business receiving your goods is able to import them

You need to make sure that the business receiving your goods has taken the necessary steps to adhere to the post-Brexit changes. You should check that they've obtained the necessary licences or certificates, or if they are able to complete the import customs declarations (if required).

Know the commodity codes of your goods

Use HMRC's Trade Tariff tool to find the right commodity code for the goods you're importing. If you're engaging a customs agent or transporter, they might be able to help you with classifying your goods.

Completing your export declarations

You'll need to decide how you'll complete your export declarations.

You have the option of either completing the export declarations on your own, or through using customs intermediaries such as freight forwarders, fast parcel operators and customs agents or brokers.

Due to the complexity of the procedures, using an intermediary is the recommended option for businesses. Refer to HMRC's guide for further instructions on steps you need to take.

If you choose to complete export declarations on your own, there are a few important things you need to know:

  • National Export System (NES): NES is a system that enables export declarations to be made electronically. To register, you'll need an EORI number and CHIEF badge role.
  • You have four options for making export declarations. You can make email, web or XML declarations. A CHIEF-compatible software for email and XML declarations. Your fourth option is to use Community Systems Providers, which are commercial entities that provide access to CHIEF for businesses. You'll need your own export software to access the system.

Whether you decide to use an intermediary or to complete the declarations yourself, you'll need to prepare the following information or documents:

  • Commodity code
  • Certificates or licences required
  • Invoice
  • Proof of origin, if you're exporting to a destination where your goods have a reduced or zero rate of duty
  • Departure point and destination
  • Consignee and consignor
  • Nature, amount and packaging of the goods
  • Method of transportation

Additional resources:

Intrastat declarations

HMRC no longer requires Intrastat declarations for exporting goods from Great Britain to the EU. Intrastat declarations are still required if you're exporting from Northern Ireland to the EU (until the end of the NI Protocol).

Additional resources:

Review Incoterms

Depending on the choice of Incoterms used in a contract, the buyer and seller will have different customs duty responsibilities. In light of the post-Brexit changes, you need to review your contracts to check if updates should be made to your contract terms and Incoterms.

Additional resources:

Additional considerations

1. Transportation:

You have two options: you may engage commercial transportation services, or use your own transport.

If you opt for the latter, you need to check for the driver's eligibility to drive overseas (they might need to have certain types of documents with them), and ensure that you have the required licences and permits. You'll also need to be aware of the different rules each destination might impose for the transportation of specific types of goods.

Additional resources:

2. Importer of record

If your company is acting as the importer of record (this will be the case if you're supplying on Delivered Duty Paid (DDP)), there are several requirements you need to adhere to:

  • You'll need to obtain an EU EORI number
  • You'll have to pay customs duty. This can be paid at the time of import, or deferred if you apply for duty deferment in the EU
  • You'll need to appoint an indirect representative to act as declarant on the customs declaration, if you don't have an EU establishment
  • You may apply for simplified procedures in the EU if you have an EU establishment
Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
What are the changes occurring with the UK VAT after Brexit? Guide

What are the changes occurring with the UK VAT after Brexit?

Here's a brief overview of the VAT changes occurring after Brexit:

Exporting goods to the EU:

  • EC Sales List: Previously, UK VAT-registered businesses that met specific conditions and were supplying goods to VAT-registered customers in the EU had to complete an EC Sales List. This is no longer required.
  • Distance selling threshold: Starting from 1 January 2021, UK sellers can no longer take advantage of the distance selling thresholds.

Importing goods from the EU to the UK:

  • Abolition of Low Value Consignment Relief (LVCR): The LVCR, which relieves import VAT on goods valued at £15 or less will no longer apply to goods imported into the UK, or for goods supplied to Northern Ireland from outside the UK and EU.
  • Postponed VAT accounting: Starting from 1 January 2021, UK VAT registered businesses importing goods from locations worldwide into the UK can use a new system known as postponed VAT accounting.
  • The £135 threshold: Starting 1 January 2021, the point at which VAT is collected on imported goods valued at up to £135 is moved from the point of importation to the point of sale. UK supply VAT-not import VAT-will be charged at the point of sale.

EU VAT Registration Number Validation service:

  • UK businesses will be able to continue to use the EU VAT number validation service to check the validity of EU businesses, but UK VAT registrations will cease to be included.

VAT flat rate scheme:

  • The scheme no longer applies to any sales a seller makes through an online marketplace, where the OMP is liable to account for VAT.

EU VAT refund system:

  • UK businesses can no longer reclaim VAT incurred in other EU countries using the electronic EU VAT refund system.

Further details on the above mentioned changes can be found in our VAT guide for ecommerce businesses.

There are additional VAT changes implemented that do not apply to ecommerce merchants. These include:

  • The VAT treatment of the supply of services to the EU
  • The abolition of the £8,818 annual threshold for cross borders sales of digital services to EU consumers
  • Businesses are no longer able to use the UK's MOSS scheme to report and pay VAT on sales of digital services to consumers in the EU. The new rules regarding the registration for the VAT MOSS non-union scheme in an EU member state will impact UK and non-UK businesses.
Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
How will Brexit affect imports, exports, and shipping? Guide

How will Brexit affect imports, exports, and shipping?

Brexit has created a significant impact on imports, exports and shipping:

  • Ecommerce businesses will be affected by post-Brexit VAT changes, which includes the abolition of the distance selling threshold and Low Value Consignment Relief (LVCR), the introduction of the postponed VAT accounting system and more.
  • Businesses will have to abide by the new import and export rules, which may mean dealing with additional paperwork and customs checks.
  • The above mentioned changes will further impact other aspects of your business, such as your supply chain, fulfillment process and pricing. Additional checks may create shipping delays, while the new VAT changes will lead to a rise in costs.
Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Don't sweat the Brexit business impact Guide

Don't sweat the Brexit business impact

This article is updated regularly as events unfold.

Enough drama and politics, in practical terms, what is actually going to happen?

Accurately predicting the future has never been easy, and the people who claim to know how to do it usually get it wrong - often due to the methodologies they have to work within.

The task gets even more convoluted with a large geopolitical development like Brexit: clear waters are muddied by personal political agendas and few people really understand things like macroeconomics, grand strategy or the development of purpose which fits history together.

We're not going to explain any of that here, where we just focus on the practicalities of the process: those legislative and business factors which are already in position.

The big question is whether Brexit will tank the UK economy. The short answer is no, because of cui bono, or those who stand to benefit.

The little questions are: to what extent will Brexit inconvenience you in your business and personal life? And the answer to that one is 'not much'.

Let's look at the actual structural changes that Brexit will result in as we piece together an apolitical, non-sensationalist picture of what is really going on.

Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Small Business Accounting Guide