Business Finance: It’s not too soon to start preparing for Brexit, says Peter Harrup
- Credit: Archant
Despite some recent signs of “progress”, the Brexit negotiations have a long way to go yet.
While the final details of the UK’s exit terms remain uncertain, one certainty about the decision to leave the European Union is that it will trigger fundamental changes in the way organisations do business.
There is the potential for boundaries to be resurrected between the UK and our nearest trading partners, where none have existed for more than 30 years.
These could create additional costs and will introduce friction into businesses’ supply chains and sales operations, whilst also having the potential to reduce access to the skills they require. Businesses must begin preparing now so that they can adapt quickly to the new environment as it evolves.
For example, if your business relies on importing or exporting goods to the EU or one of the many countries with which the EU has a favourable trade agreement, Brexit could leave you facing both higher customs duties and greatly increased administration for the goods.
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However, holding Authorised Economic Operator (AEO) status should help to speed up the transit of your goods through customs after Brexit so, if you don’t already hold AEO status, applying for it now is vital.
Similarly, paying customs duty on imported goods may well hit your cash flow. However, setting up a duty deferment account can help to manage this although there will be other costs to account for such as a lender’s fee for providing the corresponding bank guarantee.
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Brexit may also mean that UK businesses will no longer benefit from the EU directives which minimise the impact of withholding taxes (WHT). Therefore, without further action, net cash received from customers may be reduced, affecting your profit margins. UK businesses should review their contracts for “grossing up” clauses regarding WHT and confirm their eligibility for double tax relief.
BDO has created a free tool that helps you identify the tax issues your business should be focusing on: visit www.bdo.co.uk/start-brexit-planning.
You can find more background on Brexit tax issues in our Brexit Planning Guide or please get in touch with me by email to firstname.lastname@example.org.
•Peter Harrup is a tax partner at the Ipswich office of BDO LLP.