Last week the UK Government published its first batch of technical notices to help British businesses prepare for a potential “no deal” Brexit. Further technical notices are due in September, including on services and company law.
It is still unlikely that the UK will leave the EU without a Withdrawal Agreement and framework for a future relationship in place, given the mutual interests of both parties in securing a negotiated outcome. In any event, it’s crucial that economic and business stability is prioritised.
The Government has provided a reassuring commitment to “act unilaterally to provide continuity for a temporary period… irrespective of whether the EU reciprocates”, in some areas – in order to help maximise stability at the point of departure, but that does not mean everything would stay the same.
Two of the notices published last week covered financial services and VAT. There were also several notices on importing and exporting.
There remains a great amount of uncertainty for individuals and firms – particularly elements of the financial markets infrastructure, and for UK citizens living abroad who use British firms operating in the European Economic Area (EEA).
It comes as positive news that the Government would continue arrangements for three years post-Brexit to allow for the required authorisations. However, UK regulators must be adequately resourced to take on these extra burdens at a time when they’ll be absorbing responsibilities previously handled by EU regulators.
It’s also worth noting that a high volume of new legislation would be required, which would in turn need supporting regulation and implementation guidance. Legislating in complex areas requires sufficient time for consultation and must not be rushed.
It is also inevitable that, in the absence of the integration we currently enjoy, the cross-border provision of services would increase in cost and decrease in efficiency.
The reintroduction of postponed accounting for VAT is welcome – ICAEW suggested this to HM Treasury back in February as, regardless of Brexit negotiations, this will help to protect the cash flows of British businesses.
More generally and regardless of Brexit, it is anticipated that the distance selling regime will be replaced by an extension of the Mini One Stop Shop (MOSS) system across the EU. Brexit will bring an earlier end to this regime for UK businesses selling into the EU, as they will no longer be able to use the distance selling arrangements, and HMRC will no longer be able to operate MOSS. Consequently, UK businesses will have to treat the sale of goods to other EU countries as exports, in the same way as to any other country worldwide.
Supplies of electronic services to consumers in other EU countries will require registration for the non-union MOSS scheme in one of the remaining countries or VAT registration in each and every country where a domestic customer is located. Similarly, EU suppliers currently using the distance selling regime for sales into the UK will have to account for UK VAT, instead of the overseas VAT that is currently charged. This may increase prices in some circumstances.
Importing and Exporting
Most notably, the “Trading with the EU if there’s no Brexit deal” notice, suggests that businesses may want to begin taking steps now to mitigate the risks of “no deal”, and lists six such actions.
Businesses who import from or export to EU countries should take time to consider this and the other guidance notices in detail.
Members should take advantage of these papers, but also consider whether they need separate professional advice before making specific preparations.
Please also visit ICAEW’s Brexit hub for updated news, information and guidance as events unfold.
I’m confident that the Government shares ICAEW’s view that it is firmly in the interests of both the EU and the UK to strike a deal, but last week’s publication comes as a stark reminder that time is running out.