Getting ready for Brexit – 6 steps you need to take to prepare

6 steps to getting ready for Brexit

Here, we guide you through the six steps companies should be looking at if they’re getting ready for Brexit with detailed advice as to how firms can best prepare.

#1 – Tax, tariffs and customers

From January 1 2021, an Economic Operators Registration and Identification (EORI) number is required to move goods into or out of the EU. Register for an EORI number here. All goods imported to the UK will also be subject to UK Global Tariffs from 2021. As a business owner you check what these will be here.

 >See also: EORI number: What it is and how to get or check one

If the UK leaves the EU without a deal, there will be new tariffs on many goods and services that are exported from the UK to the EU. Even if a deal is agreed, there may still be tariffs to pay on some traded items. Those goods that we export to the rest of the world that are currently subject to EU-negotiated tariffs will be subject to new duty rules too, many of which have yet to be agreed.

Getting ready for Brexit

  • Monitor announcements about new foreign tariffs that could apply to your goods
  • Review your current commercial contracts to understand your commitments and how the different Brexit outcomes may impact them
  • Consider whether employing a customs agent to fill out customs declarations could be cost and time effective
  • Check if you will have to register for VAT in EU countries that you work in. An accountant with EU experience will be able to advise you on this

Sarah Gunton, commercial partner at Harper James, says: “It may well be the case that your existing agreements do not specifically mention Brexit. However, they may still contain provisions which address the allocation of risk between the parties, including sharing cost increases. For example, where you are the supplier, you may have the right to increase your prices in certain circumstances or with effect from a specified date each year. You should consider the best time to exercise those rights: it may be that the increases in the relevant prices index will only be manifested after January 1. It’s worth waiting a while before you call on your rights.

“Your agreements may also contain force majeure provisions which relieve one or more parties from the consequences of a breach caused by something outside that party’s control; for example, a delay in delivery which would not have happened were it not for an act of government.

“Clearly, such provisions will not always be in your favour, but it may be useful to be aware of them so that you can prepare for any requests by your customers or suppliers for a reallocation of risk in their favour.”

#2 – Supply chains

Start-ups must audit their supply chains to check which goods or services are procured from the EU.

Getting ready for Brexit

  • Familiarise yourself with all your contracts. Do you know what will happen if certain clauses get activated, and will they work in your favour? Speak to all of your suppliers and service providers about their plans for Brexit
  • Ask whether your suppliers are stockpiling to cover any delays at the borders
  • Find out if anyone in your supply chain will be putting their prices up to cover additional Brexit costs. Where any links in the supply chain are found to be ill-prepared for Brexit, look for alternate suppliers

Says Gunton: “Again, this is a matter of being clear as to your current contractual position, as well as the legal and regulatory framework. Where you are subject to exclusivity obligations, for example to buy all of your requirements for a particular item from a particular supplier, then your options may be more limited.

“Where you depend on a particular manufacturer to supply products, including spare parts, then you too might want to consider stockpiling, adjusting your forecasts if necessary to ensure that you are entitled to insist upon supply before December 31.”

#3 – Staffing

Any UK-based employees who are citizens of the EU, the European Economic Area (EEA) or Switzerland, must register for settled status to continue living and working in the UK six months after the end of the transition period on June 31 2021. A new points-based system for sponsored workers will be coming into effect from January 1 2021. This will cover EU and non-EU migrants alike.

Getting ready for Brexit

  • Check to see if all your staff can continue to live and work legally in Europe post-Brexit. Ensure any affected staff apply here
  • British nationals working in Europe need to be able to continue to legally work there too

Gunton says: “You may be required to make nominated members of staff available to a particular customer, who may also have the right to veto any proposed replacement [either on good grounds or on any grounds]. If a replacement member of staff must have a particular skillset, then you should take steps to ensure that you can recruit that person in good time. This may be particularly relevant if you are providing consultancy services in the computing industry.”

#4 – Finance

Additional stockpiling and storage costs to cover potential delays at the borders as the UK gets to grips with life after Brexit, new tariffs, price increases and currency fluctuations could all make a big dent in start-up finances.

Getting ready for Brexit

  • Speak to your bank or finance lender about finance options for temporarily increasing your cashflow and consider locking in currency prices at current rates.

Gunton says: “Unsurprisingly, new financial arrangements will take time and may involve extensive documentation. Your funder will also be seeking to minimise the risks of uncertain times: in order to do so, it may seek to transfer risk to you. You will need to leave enough time to ensure that documentation is thoroughly reviewed, appropriate to your requirements and has the right risk profile for your business.”

#5 – Regulatory changes and data

Currently most UK regulations are recognised within the EU and vice versa. The UK is now creating a new set of regulations to operate in parallel with the EU, but there is no guarantee that they will all be ready in time or that the EU will accept them all. These regulations cover every industry, even down to the classification of organic foods.

Brexit could have a major impact on the regulation of data. From January 1 2021, the EU is most likely to treat data transfer to and from the UK in the same way that it does other non-EU countries. Non-EU countries that wish to transfer data without restrictions, subject to GDPR compliance, from the EU are subject to adequacy decisions by the EU.

The EU should have already begun its adequacy assessment of the UK and it’s hoped that it will make an adequacy decision on the UK during the transition period, providing all the conditions are met, but this is not guaranteed.

If an adequacy decision is not made, GDPR transfer rules will apply to any data coming from the EEA into the UK. To comply with these rules, you may have to take steps to put GDPR safeguards in place to ensure that data can continue to flow into your company in the UK from the EEA.

Getting ready for Brexit

  • Keep up to date with changes to UK data protection law after Brexit by regularly checking the UK Information Commissioner’s Office (ICO) website
  • The government is advising some UK data controllers and UK data processors to appoint an EEA-based representative: check if this applies to you
  • Even if you don’t transfer data to and from the EU, review where your data is stored. You may discover that your third-party cloud computing supplier hosts your data in the EEA
  • If this is the case, move your data to the UK during the transition period. You don’t want your data to be stuck in a data no-man’s land in the event of a no-deal Brexit. Assess which regulations impacting your business could change: industry bodies are a good starting point
  • Contracts and other paperwork may need to be revised post-Brexit. Assess whether your privacy rules, terms and conditions, contracts and other documentation need revising to reflect post-Brexit data protection laws and other regulations

Says Gunton: “Your privacy policy must make transparent to each data subject what you do with personal data. This includes detailing those of your suppliers who handle personal data on your behalf. If you change those suppliers – such as your hosting services provider – then you will need to amend your privacy policy so that it gives an accurate picture of your data practices to each data subject.”

#6 – Look to new markets

Brexit may cause some UK start-ups to shift their focus from EU business. If your trade could be negatively impacted by Brexit, look into expanding into new markets outside of the EU.

Getting ready for Brexit

Gunton says: “While the UK was a member of the EU, you could assume that many laws were effectively the same across the EU. This made it easier to justify insisting with European customers and suppliers that a con- tract should be subject to the laws of England and Wales. As there is no guarantee that the interpretation of a contract under the laws of England and Wales will be the same as an interpretation under another law, you may have to take local law advice.

“It’s also worth exploring whether your goods and services requirements can be achieved by contractual obligations, rather than relying upon the law. For example, if the regulatory controls are weaker in your new market, then in order to maintain the required quality standards.”

Sarah Gunton is a commercial partner and in-house Brexit expert at Harper James Solicitors

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