How to Navigate the Brexit Impacts to Operate Your Business
Now that the UK’s Brexit transition period is over, here are some of the key impacts that Brexit has had on UK companies and what you need to know to successfully trade post-Brexit, including handling of imports and exports, getting an EORI number and recruiting staff from the EU.
The way British businesses trade with countries in the European Union changed at the beginning of 2021, following the end of the post-Brexit transition period.
Rather than being in a trading bloc with the 27 EU countries, the UK is now a separate trading entity and British businesses have to follow a whole new set of rules and regulations to trade with countries inside the European Union.
While it might seem complicated at first to sort out how you’ll operate your business in this new era, there are clear guidelines covering all aspects of doing business with the EU, including how to manage importing and exporting, travelling for business and employing staff from outside the UK.
What businesses need to trade with Europe
The UK-EU Trade and Co-operation Agreement – more commonly known as the Brexit deal, which was agreed on 24 December – set out all aspects of trade between the two entities.
Here’s how this agreement may affect your business.
Key impacts on British companies
- You will now need to make customs declarations when exporting goods to the EU.
- You must have an EORI (Economic Operators Registration and Identification) number to import and export goods.
- You may need a visa or a work permit if you want to travel to the EU for work.
- If you want to recruit people from outside the UK, then you need to be a licensed sponsor under the new points-based immigration system.
Declaring imports and exports
A customs declaration is an official form that gives details of the goods that are being imported or exported. Since the start of 2021, businesses need to make customs declarations when they import or export goods to and from the EU, much in the way they need to do when importing or exporting from other countries around the world.
How do businesses make customs declarations?
Companies can make the declarations themselves or go through a third-party such as a courier, customs agent or freight forwarder as the rules can be complicated. Even if you use a third party to handle this part of the process, your company will still be responsible for all the information sent to HMRC, so make sure you keep track of all your records including what you have paid and all the information you have submitted.
How can I file my own customs declaration?
Most declarations are submitted electronically via the Customs Handling of Import and Export Freight system, known as CHIEF. If it is your first time, you will need to apply for access to the system and make sure that you have the correct software.
What are the penalties for getting a customs declaration wrong?
If you get a customs declaration wrong, then you could be investigated by HMRC and could receive a warning letter or have to pay a fine. In more serious cases, such as if there have been deliberate attempts to evade tax, then there are more severe penalties including seizures of goods and even imprisonment.
How long do I need to keep records and accounts for?
HMRC requires all businesses to keep customs records and accounts for at least four years. In the case of a criminal investigation, records dating back up to 10 years may be used in evidence. Excise records and VAT records should be kept for six years.
Getting commodity codes and licences for the goods you are importing or exporting
Every type of goods has been assigned a commodity code which will determine the rate of duty payable on that particular product and whether or not you need to get an import or export licence. If you don’t know the commodity code for a certain type of product, you can use the government’s Trade Tariff tool to find the correct code. Once you have found out the commodity code, you will need to include it on your customs declaration.
The Trade Tariff tool will not only list the correct import and export codes but whether you need a licence to move the goods. You might need to get a licence if you are handling goods such as plant or animal products, medicines or hazardous chemicals.
Some items such as plant or animal products might have to be inspected before they can enter the UK and you might have to pay an inspection fee.
If you are exporting goods, then you will need to know about the rules, restrictions, and tax and duty rates of the country you are exporting to. Find the specific details for the country you are exporting to.
Paying customs duty, excise duty and VAT on imports
When goods are traded across country borders, they attract customs duties (also known as tariffs) and other charges such as excise duty (often on restricted goods such as alcohol and tobacco) and VAT. The value of the goods determines how much duty and VAT you will have to pay.
Now that the UK and EU signed a trade deal at the end of 2020, there are preferential rates of duty between the two parties, meaning that goods formerly traded freely will now be subject to 0% tariffs and not restricted by quotas. Goods that previously attracted duty, such as alcohol and tobacco, will continue to do so.
There are two ways you can pay duties on imported goods into the UK. You can defer duty until a future date, or pay at the time the goods enter the UK.
If you have a duty deferment account, you will be able to delay paying customs duty, excise duty and import VAT each time and instead be able to make one payment a month via direct debit. This means that goods are likely to clear quicker as there won’t be the need for a payment for each transaction.
You can also defer payment by using a customs agent.
If you want to pay each time your goods come into the UK then you can pay by card, cheque or bank transfer via the Flexible Accounting System (FAS). This is linked to the CHIEF payment system detailed above and works like a bank account in that you deposit money in the account and then use that to pay any import charges.
Getting an EORI number
All UK businesses which want to trade with other countries are required to have an Economic Operators Registration and Identification (EORI) number.
If you don’t have an EORI number then you run the risk of your goods not being able to clear customs, which will cause delays and extra storage costs. If you already have an EORI number but it doesn’t start with GB, then you will have to apply for a new one.
How to apply for an EORI number
To apply for an EORI number you will need:
- Your VAT number and date of registration if you are VAT-registered. You’ll find these on your VAT certificate which you will have been sent when you registered for VAT. All businesses that have a turnover of more than £85,000 (which isn’t VAT-exempt) have to register for VAT with HMRC. You do not have to be VAT-registered to get an EORI code.
- Your National Insurance number if you are trading as an individual or as a sole trader.
- Your ten-digit Unique Taxpayer Reference (known as your UTR). You will automatically have been given a UTR when you registered as a limited company or registered for self-assessment, and you’ll find this on previous tax returns. If you have lost your UTR then you can ask to be resent one.
- Your business start date and Standard Industrial Classification (SIC) code – these can be found in the Companies House register.
- Your Government Gateway user ID and password.
What happens if my goods are held at the border?
Your goods might be held up at the border if you haven’t paid the right amount of duty or VAT, if you do not have the correct import licences for your goods or business, or they didn’t pass inspection. If this happens you will be contacted by the National Clearance Hub and told the cause of the delay.
Rules for business trips within the EU
If you are planning on travelling to the EU or other European countries such as Switzerland, Iceland, Norway or Liechtenstein for less than 90 days in a total period of 180 days – say, to attend a business meeting or conference – you might not have to get a visa or a work permit. If you are planning on staying longer, then you might need to get a visa, work permit or other documentation to allow you to do this. Check out the requirements for each country.
» MORE: Driving in Europe after Brexit
How to recruit staff from within the EU
Non-UK citizens, including from the EU, the EEA or Switzerland, coming into the UK to work need a visa under new rules introduced on 1 January 2021. To get this, they need to show they have a job offer from an approved employer sponsor. If your business wants to recruit from the EU, you should apply to become an approved sponsor and if successful, the approved sponsor status will last for four years.
If you already employ staff from the EU, the EEA or Switzerland, they will need to apply to the EU Settlement Scheme by the end of June 2021. Find out how they can apply.
Where to find Brexit business support
It might seem like there is a lot to take on board but the good news is that there is plenty of guidance out there in case you need help.
There is even a government questionnaire to show you exactly what regulations apply to your business.
Finally, many of the new procedures, such as getting an EORI number, registering with the CHIEF payments system, setting up a duty deferment account and applying to become an approved sponsor will only have to be set up once, and then you’re good to go.
Setting up your business for trading with EU post-Brexit will take some initial work, but there is hope it will get smoother with time.
Image Source: Getty Images
Sarah Bridge has been writing about business and finance since 2000. She was formerly Deputy Editor, Personal Finance, The Mail on Sunday and was previously the paper's Leisure Correspondent. Read more