Your four-step Brexit checklist for VAT and Customs
Doing business with the United Kingdom (UK) will change drastically for companies within the European Union (EU) as of January 1, 2021. The transition period will last until December 31, 2020, but after that date Brexit will be a reality. The EU and the UK are still negotiating the terms of their future relationship, but whatever the outcome, you need to be prepared.
Prepare your company for Brexit in a few steps!
To kick-off our Baker Tilly Brexit Bites, we have created a Brexit checklist, outlining four steps that a company could take in preparation for Brexit. Once the clock strikes twelve, there will be no turning back and (certain) changes will take effect immediately. Therefore, it is better to be safe than sorry.
Step 1: Analyse the supply chain
Analyse the supply chain of your business, and map the transaction flows with the UK. This will provide an opportunity to focus on those flows, and determine or examine whether those flows can, and should be, adjusted. Following that analysis of the supply chain, potential obligations can be identified or even prevented.
Step 2: Check your logistics partners
Goods can move freely within the EU; there are no customs obligations and goods can be transported across borders without being stopped for administrative reasons. This is referred to as the principle of free movement of goods. In relation to non-EU countries, this principle does not apply, and it is clear that without this principle it is much harder to move goods around. After Brexit, trading goods with the UK could potentially become harder, as there will be import and export obligations. Ensure that the logistics partners you have contracted are equipped for the additional tasks.
Step 3: Check the contracts
Check all contracts relating to transactions with the UK and, more specifically, check the conditions that were agreed upon. This applies both for the contracts with your customers as well as those with your suppliers.
Using the right Incoterms can, for example, prevent additional obligations arising for both parties. We also recommend that you consider the existing VAT and customs obligations of the parties, in order to benefit fully from existing arrangements.
Step 4: Make sure you have arranged the right formalities
When doing business with the UK after Brexit, you may be faced with additional formalities. It may be the case that goods are exported from, or imported into, the UK. This will trigger customs formalities such as customs declarations, import and export licenses, authorisation for customs simplification or procedures, or valuation. To avoid costly problems after Brexit, you need to be aware of these requirements and their impact on your business.