Brexit – beyond the transition
The UK left the EU on 31 January 2020 and the Brexit transitional period is due to end on 31 December 2020. Whilst a new UK EU Free Trade Agreement is under negotiation, from 1 January 2021 companies will find significant challenges trading in the EU. There will be new import and export tariffs, documentation requirements and VAT charges. For financial services businesses, there will be major regulatory changes.
We understand the uncertainty during this transitional period and supporting our clients through these challenges is what we do best. We can help you consider a number of important areas:
Review and protect your supply chain – We have helped many companies, especially those in the insurance sector, to review their supply chain and develop a post Brexit operational strategy to protect their EU market. Working with PKF experts in Europe, we have helped our clients establish new trading companies and structures. With careful planning, we can help you mitigate the expense of running additional EU operations and manage tax leakage (especially VAT) on crossborder transactions and business.
From 1 January 2021 the new UK Global Tariff Regime (UKGT) will apply for all imported goods where the UK does not have a Free Trade Agreement or other specific exemption. Under UKGT the average customs duty will reduce from 7% to 6% with a 0% tariff on another £30bn of goods.
Contracts and commercial relationships – Companies must check loan agreements to ensure that all EU or UK legal references have the correct interpretation and enforcement. A review of your existing EU registrations for intellectual property, trademarks and designs is essential to ensure they will continue to provide the expected legal protection.
Systems and data – New data and processes will be required to submit import and export declarations and information about product origin. The government has announced that importers will have a 6-month phased introduction of border controls.
People – Certain people will operate in more than one country and while the need for EU work permits and visas is uncertain, the obligation to pay income tax and social security by internationally mobile staff is well established. Our global mobility team will help you record international movement as well as determine UK and local country employment taxes, social security and settlement procedures.
Tax and finance – In establishing EU operations, companies need to consider corporation tax on business transfers to the EU, the impact of transfer pricing, efficient financing, withholding tax on dividends and interest, local jurisdictional taxes as well as VAT on transfers, intra-group recharges, revised partial exemption methods, local registration requirements, local VAT interpretation and reverse charges.
Our expert team continues to assist clients with their Brexit reviews and preparations. Our Brexit experience, industry knowledge and technical expertise will help to mitigate corporation tax and VAT leakage and ensure your business is prepared for the challenges ahead.