Although we strive to be non-political in this blog, it would seem that there is an increasing likelihood that when we leave the EU March next year the present free movement of goods will no longer apply. And so, putting aside our reaction to this possibility, what should we be doing to prepare for this so-called “Hard Brexit”?
Do you rely on EU Suppliers?
A fair proportion of the raw materials used in our manufacturing processes and the food we eat come from EU suppliers. It is unrealistic to expect UK businesses to increase stocks in anticipation of disrupted supply lines and increased prices after a hard Brexit. In the case of perishable foodstuffs this is patently impossible. Perhaps we could lobby EU suppliers of manufacturing and finished goods to set up warehousing facilities in the UK, otherwise we may be forced to seek suppliers from outside the EU.
Paying VAT at Source
With a hard Brexit it’s unlikely there will be a harmonisation of VAT for cross-border transactions and businesses that buy goods from the EU will be faced with paying the VAT when they purchase the goods. Eventually, the VAT can be reclaimed back in the normal way but there will be an initial cash flow hit as goods are paid for (including VAT) before the input VAT is reclaimed on a quarterly VAT return. HMRC may help with this issue by introducing a self-accounting for import VAT scheme similar to the present scheme for imports from EU countries. Businesses affected would be advised to at least quantify the likely cash flow downside and if significant, plan for additional funding to cover the deficit.
Retailers will have a tough time if they buy perishable goods from the EU. Without frictionless passage of goods across the Channel, delays could cause all sorts of issues. If warehousing in the UK is not possible, it is difficult to see how we could maintain our supplies and keep the larger supermarkets stocked.
Business Planning for a Hard Brexit
We have less than nine months to prepare, and wherever your business sits in relation to trading with the EU you should by now be making contingency plans to cope with the likely Brexit effects. We are certainly working with and supporting our clients in this way. If you would like to discuss this topic or need further help with any business or tax related matter please contact us via email at firstname.lastname@example.org or call us on 0800 680 0413.
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