At the end of December 2020 the UK enters a brave new world, it seems appropriate to see How Brexit affects your Business

We have lots of questions about Business and Brexit, some answers we know, some answers we don't. In this weeks podcast we share some answers, advice and tips.

What is Brexit?

Firstly, Brexit is a fusion of the words “British” and “exit”, referring to the U.K.'s decision to leave the European Union (EU).

The U.K. is now in a transition period to negotiate a new relationship with the EU. The UK has no say in EU policy, but will still need to abide by EU rules.

There will be new rules from January 1st. 2021.

This podcast is about How Brexit affects your Business.

Introduction

Up until 11 pm on the 31st December 2020 we are still part of the EU. Though the European union has already removed us as member on their website

From the 1st January 2021 we will be known as a third country, all countries outside of the UK will be known as the Rest of the World.

 General Data Protection Regulation (GDPR)

The GDPR (General Data Protection Regulation)is about the rules relating to how we collect and process personal data. The Data Protection Act 2018 is the UKs implementation of GDPR. Listen to find out what happens from 1st January 2021 ? What steps can you take. Apart from our podcast, check out The ICO, Information Commissioner’s Office.

Listen to learn more

EU settlement scheme

Your business may have EU/EEA/Swiss nationals living in the UK by 31 December 2020. What happens if you wish to keep them on?

Listen to learn more

From the 1st January 2021 the UK will become a separate customs territory from the EU. This means that all imports, and exports of goods to and from the EU will become subject to customs procedures. This will refer to EU goods imported into the UK and UK goods exported to the EU.

Any “deal” will affect the duty rate on eligible goods. Your import and export declarations will still need to be made.

Customs controls

From 1 January 2021 customs controls will apply:

• If your business imports or exports outside of the UK you will have to complete UK and EU customs declarations.
• Work out the relevant customs duties

 Should you do this yourself, or use a third party like a freight forwarder . What’s the business case, is DIY better than using an agency.

Listen to find out more

For example, if you DIY you will need to get access to HMRC systems and invest in software.

After 31 December 2020, the UK will be a third country, any goods sent to Europe will be classified as exports, any goods coming in from Europe will be classified as imports. Prior to the 31 December 2020 those movement of goods would have been seen as EU would be intra-EU acquisition.

Economic Operators Registration and Identification number (EORI)

Listen to find out what an EORI is, why you need one and how you get hold of one – spoiler alert, if you are importing then you need one. Any economic operator established in the customs territory of the Union needs, for customs purposes, an EORI number

Any economic operator established in the customs territory of the Union needs, for customs purposes, an EORI number.

UK trade tariffs from 1 January 2021

Whatever the outcome of the trade talks there will be duties to pay. Your business will be using

The UK Global Tariff rates.

Listen to find out this affects your business, how to apply it and paying it. Do you need pay on import, can it be delayed, listen to find out more

There are new rules for duty deferment that will apply in Great Britain (England, Scotland, and Wales) from 1 January 2021. Most traders will not need a financial guarantee with their duty deferment account.

 VAT

Value Added Tax (VAT)

VAT is a Tax that is levied on goods and services provided by VAT registered businesses in the United Kingdom, to other VAT registered business and/or public.

The UK introduced VAT when it joined the European Economic Community (EEC) in 1973.

Will VAT continue after Brexit?

In theory the UK could abolish VAT after Brexit. In practice, very unlikely. It has about much chance as being abolished as discovering Elvis works at the check-out isle of Tescos.

Listen to find out why and what changes to VAT are envisaged, how it will be paid and

Changes to Vat after Brexit

The big change after Brexit will be how VAT is charged on trade with the remaining 27 member states. How big that change will be is all based on the final negotiated outcome.

What Next

In conclusion, when Brexit happens, we will leave with a 47 year membership behind us. The EU has been a major part of business life, leaving is a big deal.  Make yourself comfortable. Sit back and listen

Most importantly, subscribe so you do not miss an episode.

 In This Episode

• Understanding what Brexit is
• Appreciating how the GDPR will change for the UK when Brexit happens.
• Hearing about the change in customs procedures and tariffs
• The cash flow impact, with duty, VAT and tariffs
• Developing your own Numbers confidence and decisions
• Take more control of your numbers to help make you money, survive and thrive

Links

https://podcasts.apple.com/podcast/proactiveresolutionss-podcast/id1500471288

https://play.google.com/music/m/I3pvpztpjvjw6yrw2kctmtyckam?t=I_Hate_Numbers

https://open.spotify.com/show/5lKjqgbYaxnIAoTeK0zins

https://www.stitcher.com/podcast/proactiveresolutionss-podcast

https://tunein.com/podcasts/Business–Economics-Podcasts/I-Hate-Numbers-p1298505/

You are listening to the I Hate Numbers Podcast with Mahmood Reza. The I Hate Numbers podcast mission is to help your business survive and thrive by you better understanding and connecting with your numbers. Number love and care is what it's about. Tune in every week. Now, here's your host, Mahmood Reza.

The 23rd of June, 2016 has got two memorable events that have occurred. Number one, it was my birthday, and number two is when the UK government announced it was going to hold a referendum to determine whether the UK would remain a part of the European Union. Fast forward and on the 1st of January, 2021, we, the UK, will no longer be part of the European

Union. Officially, our membership ends at 11:00 PM on the 31st of December, 2020. This podcast is going to be addressing some common questions that businesses have in respect of the European Union and what's it going to look like on the 1st of January, 2021. Hi, folks. Welcome to this weekly episode of I Hate Numbers, where we are going to be talking about business and Brexit,

some frequently asked questions, some may call this the good, the bad, and the ugly. During this podcast, I'm going to address five key themes. I'm going to be looking at the impact of our exit from the European Union on GDPR. If you employ staff that are EC nationals, customs, so if you import or export goods in and out of the European Union, what's the impact there going to be?

We're going to be talking about the impact on cash flow. We're going to talk about VAT as well, and as a special Brucie bonus in next week's weekly episode, I'm going to be talking further about VAT and the supply of services within Europe as well. So, let's crack on with the broadcast. Now, before we address the five themes, the five points here, let's just remind ourselves what Brexit actually means and what it refers to.

Brexit is a fusion, if you wish, an amalgam of the words of British and exit, and neatly put together to come up with Brexit. We are at the date of this broadcast in a transition period and we are in the midst of negotiating a new relationship with the EU. And when I'm saying we, they haven't included me in those negotiation talks,

it's the UK government that are negotiating a new relationship with the EU. Geographically, physically, we still are where we are. At the moment, the UK doesn't have any involvement or rights in any decision making on EU policy, but like a membership of any club, we still have to follow the rules of the EU.

Speaking on the 11:00 PM 31st of December, 2020, those rules no longer apply to us. If I look on the website of the EU, the UK (excluding Northern Ireland) is no longer listed as a member of the EU, even though officially we still are a member until that magic date on the 31st of December. Many of us don't actually know the true economic impact of Brexit, and it's not the purpose of this broadcast to talk politics, to talk about the whys and the wherefores, whether it's the right decision, I'm focusing on the impact on businesses and what we can do to prepare for it.

Now, as a back cloth, what I'd like us to think in terms of is imagine we have the EU at the moment, there are 28 countries that make up the EU of which we are still a member, and then we have the rest of the world. Once we leave and once we start a brave new world on the 1st of January, 2021, then we are no longer EU.

So, it's best to think of UK and then the rest of the world. Currently, within the EU, we have this what's called free movement of goods and services. Very minimal paperwork. Very minimal restrictions. Very minimal barriers going back and forth. Once that happens, then our relationship will be as though we are dealing with the rest of the world.

The UK, by the way, will be referred to as a third country. There is a lot of published information already out there. At the end of these show notes, I will share some links, some resources to help you on your journey with Brexit. The key thing at this stage of the game is not to panic. Figure out where you are,

in terms of your relationship with Europe currently, your relationship going forward. Look at your systems. They will need to be revised. We've got lots of things to address, like supply chains, commercial agreements, duties, and all the rest of it. But I don't want you, folks out there, to get overwhelmed.

Let's take a deep breath. Grab your coffee, glass of wine or whatever your poison is, and let's go through the next thing. So, we've dealt with, generally speaking, what Brexit actually refers to. One of the first things I want to address is GDPR. Now, GDPR, to give it its full name, stands for General Data Protection Regulation.

That's a bit of a mouthful. GDPR or the GDPR is actually a European Union initiative. It was enshrined into UK law under the Data Protection Act 2018, and is our version, our implementation of the GDPR. The government have announced that post Brexit or post-Brexit, post-transition period, the GDPR fundamentally will still apply

in UK law. Now, the detail has not been announced. We still need to comply with UK data-protection law, and the UK government have announced that they are intended to incorporate it fully in any revised legislation. So, fundamentally, there's going to be very little change to the core data principles and obligations that we currently find in the GDPR.

The EU version though, however, may still apply to you if you operate in Europe, offer goods or services to individuals in Europe, and also if we monitor the behavior of individuals. Now, that's nothing insidious like James Bond or MI5. Uh, they've got their own rules or GCHQ, but effectively you need to examine where you are.

The GDPR would still apply to any organisations in Europe who send you data and, then, you've got to decide with them how to transfer personal data to the UK in line with the GDPR. If we don't comply as a UK business, then it's largely going to affect our trading relationship and businesses may not actually trade with us.

There are steps we can do to make sure that personal data can continue to flow. I'll mention it now and there'll be a link in the show notes at the end. The head honcho that looks after data protection in the UK is what's called the Information Commissioner's Office, and then there's a link in the show notes to find out some good resources there to share.

The second thing I want to comment on is if your business has any EU or Swiss nationals living in the UK by the 31st and December, 2020. So, if you employ somebody for, say, from France or Germany, just to give you two examples of EU countries if you weren't aware what they are, and you wish to retain their skills, they wish to retain working with you, then they need to register on the UK settlement scheme, and they have until the 30th of June, 2021.

It's free, which is good news, so there's no cash that changes hands, but there is still time invested in completing the application form. The application form is online. You can apply now. And if you meet the criteria, then your employees, you can retain those skills and they will continue working for you.

Remember, the deadline is 30th of June, 2021. If you haven't completed the application by then, then there's no right to remain in the United Kingdom. So, we dealt with GDPR. We've dealt with the UK settlement scheme and that's for nationals who are EU, EEA or Swiss nationals with the right to remain settled in the United Kingdom and continue to work and have a good, positive life.

The third thing I want to have a look at is if you are an importer of goods or an exporter of goods, and paperwork and customs declarations. To give some clarity, whatever the actual final outcomes of the trade negotiations with the EU are, and they still have not been finalised, then all that's going to change

fundamentally for our purposes as an SME business that imports goods or export goods is the duty rates that would apply. There will be paperwork, there will be procedures, there will be customs declarations to be made out, and whatever the negotiations are, that is still fundamentally going to remain.

Currently, if you move goods in and out of the EU, between the UK and the EU, they're strangely known as intra-EU acquisitions. That's a very strange piece of terminology. So, even though in conversation terms we look at those as imports and exports, they are not considered that for customs declarations. At the end of the transition period,

so 1st of January, 2021, customs procedures will kick in and we will be dealing with the movement of goods between the UK and the EU and the rest of the world exactly the same. What that means is customs declarations will have to be made. Now, what does that actually mean in practical terms? Well, number one, will you have to complete a declaration form, and those are goods coming into the UK,

and we have to complete declarations for goods going into the EU and outside the EU, as we currently do. There will be two separate forms of declarations, a UK and an EU customs declaration. We then also need to make sure that any customs duties that are due on the importation of goods are duly paid.

There's a new tariff system called the UK Global Tariff Scheme. Now, a challenge for us is there are approximately 15,000 commodity codes as such, and based on what category your goods fall into when they're imported, you then have to declare and state what the duty is and make the due payment. There is a bit of positive, good news in terms of when that has to be paid.

I'll share that with you in a few moments on this broadcast. So, if there are any duties on those goods, there may be some exemptions. We don't actually know what they are fully. There are 15,000 codes to look up, so to speak. So, we've got to make sure we know what they are. There is a facility that if you're not quite sure what the code is, make that declaration accordingly.

Now, in addition, there will be VAT levied on imports of goods from the EU, and that's in line with what they are for the rest of the world as we are currently. Now, if your business is currently VAT registered, by the way, you can actually delay paying an EV VAT on those imports by something called ‘postpone that accounting’.

What that means is that any VAT due on the import can be delayed and declared on your VAT return when those goods are actually sold on. Currently, if they're imported, any VAT due on them is delayed and declared and paid over when your VAT returns are completed. So, that's going to be good news from a cash flow perspective.

If you're not VAT registered, by the way, then you've got to report and pay for the import VAT in the same way as you currently do for customs duties for goods outside of the EU. In addition, if you are moving goods in and out of Europe, you need something called, now it's an interesting phrase this, it's called an economic

operators registration and identification number, shorthand EORI. So, let me repeat that. Any movement of goods in and out of Europe will be treated in the same way as goods moving between the rest of the world and the UK. And for that we do need an EORI number. Now, we need a UK-specific number for goods imported in the United Kingdom.

If you are looking to transfer, import goods into the EU, you also need a specific EU-issued number, and the actual application process is quite light-touch. It takes a few minutes of time to complete. The application process is open now, but bear in mind it can take up to a week to get that number and where we are now coming into December,

that might take slightly longer. So, again, I would certainly recommend if you are in that situation, make the application process sooner rather than later. As a little bit of positive news, if you are an auto-enrolled VAT-registered business with EU trade, it's likely that HMRC may have already enrolled you and allocated a number.

So, check it out, speak to your numbers team, check your documentation, and it may alleviate the necessity to re-register. With all this here in terms of customs declarations, procedures, knowing commodity codes, getting all the paperwork completed, if you are a relatively accomplished and a seasoned importer and exporter,

you may be doing it yourself. You may have the capacity and the resources to actually understand all the rules and regulations. Your business may use what's called a freight forwarder or a customs agent, effectively a third party, an intermediary who does all that work for you. Now, if you're in neither situation, so you are about to embark

on importing and exporting goods, and you're not a hundred percent familiar with the paperwork and procedures, then do a business case for this. If you're going to do a DIY option, remember, you need to get access to HMRC systems, you need to invest in the appropriate software, you need to understand the rules and regulations. So, it may be worthwhile to explore the option of using a third party, like a freight forwarder or customs agents, to do the work for you.

Just mentioning again, now. We talked about GDPR. We've talked about employees. We talked about customs procedures. We've commented about cash flow. Let me give you another heads up about cash flow. We've mentioned about delaying the VAT on imports and under something called postponement of VAT or VAT postponement, if you want to be more particular.

The other area where we can potentially have a cash flow benefit is when it comes to UK duty on goods that are imported. Let me repeat this, that in terms of after the 31st of December 2020 11 PM, any goods coming from Europe into the UK, Northern Ireland excepted, will be classified as imports. VAT will be due,

potentially. Excise duty will be due potentially, and customs duty will be due potentially. It's likely one of those will apply. Now, if you wish to defer the duty, you can set up what's called a duty deferment account that you can make one payment a month through DD instead of paying for individual consignments,

and you can apply now for what's called a duty deferment account if you're an importer or an agent that represents importers. A customs agent, by the way, can actually do the duty deferment on your behalf. Now, these rules will apply to England, Scotland, and Wales. Northern Ireland is treated differently.

Most traders, by the way, should give you another sort of a potential headache that's relieved. You will not need a financial guarantee with your duty deferment account. Now, that is subject to getting clearance procedures on that. If you have got an interesting and challenging record of compliance with the authorities, then it's likely you will need to provide a financial guarantee, but in the main, most traders will not need to provide a financial guarantee.

Now, luckily for us, we can apply for a new duty deferment account and a guaranteed waiver to avoid the need to get a financial guarantee. Now, let me just comment and summarise at this stage before we talk about our last area, and that's the topic of VAT. At the beginning I mentioned that there's going to be a Brucie bonus and I'm going to be re-addressing VAT

in respect to services in next week's podcast. A lot of this might seem quite overwhelming. A lot of this might seem quite daunting. Again, I will share in the show notes at the end some links to resources, some links to third party sites which will give you an insight and support you on some of the documentation and the procedures that you've got to.

Now, I'm not running away from this. This is quite a hefty exercise. Many businesses have already begun the process. There hasn't been an element of lack of preparation because that information has not been disseminated early enough. There's an element of uncertainty because we don’t know what the final trade deals will look like.

We also had the intervention of coronavirus. We have had the intervention in terms of lots of financial advisors and accountants have been preoccupied with things like Coronavirus, dealing with helping and supporting our businesses as we have. So, expect some form of, some say volatility and challenge, but you need to embrace this and you need to start preparing for this right now if you haven't already.

I want to comment on VAT. Now, VAT was introduced into the UK when we joined the European economic community, as it was called then, in 1973. We actually joined officially on the 1st of January, 1973. So, 47 years later, you know, we will be leaving. Now, prior to VAT, we had what was called a luxury tax, a purchase tax. VAT is fundamentally a European union tax.

There is an argument that the UK could, in theory, get rid of VAT and with a swipe of the pen, a swipe of their hand, VAT could be abolished. The likelihood of that happening is as likely as Elvis turning up at the local Marks and Spencer on the checkout counter. It raises for the Exchequer approximately 137 billion pounds worth of revenue, and that's about 21% of total tax receipts.

And the government has also affirmed it will have a VAT system in the UK and also, in addition, 160 countries around the world use VAT as a tax generator, tax-revenue raiser. It is a very efficient system for them, so don't expect that to vanish. The big change for VAT post Brexit will be how it's charged with the remaining 27 member states.

That's all going to be based on the final negotiated outcome. Goods, we've talked about. So, when goods come into the UK from the EU, then there will be VAT payable on those goods subject to that trailer being VAT registered. We can delay paying the VATs we've mentioned. When it comes to services, services are a slightly different proposition, and in next week's podcast I'm going to be talking about VAT and services, the interaction with Europe.

We're going to introduce something called the place of supply rule. So, I know the excitement levels are building up as we speak. Now, folks, just to round up. The UK will have left the EU on the 1st of January, 2021. We will be called a third country. Fundamentally, how we've done business with non-EU countries currently

will be largely how we are going to be looking at it in terms of principle and approach. Lots of things to sort out, lots of paperwork to check, systems to update, checking cash flow, commercial agreements that we made, supply chains, VAT duties, et cetera. And any transformation to new ways of working and systems always can feel quite overwhelming, quite

daunting. Keep calm. Put together a flow chart of what's going on at the moment in your business currently and your relationships with the EU, and examine all your processes and procedures. Get a checklist started. Think about your plans going forward, and again, check out the government guidance. I will share that, as I said with the show notes at the end.

Hope you found this useful. Share the podcast. I'd love it if you gave it a thumbs up. Give me some feedback. Until then, everybody, enjoy your countdown to Brexit and I'll be back with you on the I Hate Numbers show next week. We hope you enjoyed this episode and appreciate you taking the time to listen to the show.

We hope you got some value. If you did, then we'd love it if you shared the episode. We look forward to you joining us next week for another I Hate Numbers episode.