Brexit and its impact on your company
The divorce battle between the United Kingdom and the European Union is in full swing and the result is still unclear. Several possibilities exist as to the ultimate setup of the relations between the United Kingdom and the EU.
To be prepared for the “big day”, it is advisable to expect the “no deal” or “hard Brexit” scenario. If your firm has any connection with the UK, whether you export, import or employ British citizens, you should definitely review your current tax, law, customs, employment and risk management arrangements. Because Brexit in any form will ultimately significantly affect all of these areas. Without correct assessment your business can be hardly impacted. Our ten recommendations may be of assistance to you in this respect.
The process of subsequent adjustments of relations between the UK and the EU is complicated; on top of that, we do not know how it is going to end. Both sides declare ambitions to quickly conclude a generous free trade agreement; however, both parties are believed to have different ideas about its form and the extent of adherence to the EU rules necessary for its constitution.
The situation is even more complicated by the fact that the UK is the fifth largest economy in the world and Europe´s second – its share on the EU´s GDP is 15%. Brexit will therefore affect the economies of Germany and the USA the strongest, because these belong among its major exporters/importers.
Additionally, it is still possible that the agreement will not be concluded by the end of the transitional period and that the “no deal option” will indeed turn into reality. In this case, the custom union will cease to exist and mutual trade will be subject to tariffs and other restrictions, including the abolition of free movement of people and services. How to prepare for such a situation?
Brexit at the Eleventh Hour: Top Ten Priorities that Will Help You Prepare for Brexit
- Designate the persons responsible for individual risks and Brexit “action points”.
- Conduct an audit of the contracts concluded with your British partners as early as possible. If you are going to conclude a new contract with a British counterparty, do not forget to include a detailed Brexit clause.
- Pay special attention to a review of business contracts in relation to INCOTERMS.
- Review the tariff classification for correctness and calculate the customs, if relevant.
- Verify the requirements of import to the United Kingdom – may the goods enter the country without a permit or licence?
- Review all you regular transactions (supply of goods and provision of services) with UK firms. Verify whether the application of VAT will change post-Brexit.
- In principle, British VAT included in the price of purchases made in 2020 should be refunded by the British tax administration; however, respective procedures will change, so get ready for them. Also, keep in mind that in the coming years, claiming a VAT refund in Britain may not be possible at all.
- Review whether your employees – British nationals – are residing in the Czech Republic based on a temporary or permanent residence permit. Prepare for a possible change in the recruitment of new employees from among British nationals after 31 December 2020.
- Conduct a comprehensive impact analysis from the perspective of risk management, prioritise risks and determine appropriate measures for their mitigation.
- Implement the measures you have set, review them and assess their efficiency and effectiveness – have they reinforced you?
Are you having trouble deciding the right approach to Brexit? Contact us, our specialised team will help.