Brexit: As a new deadline looms, what must businesses consider?

With the UK’s departure from the European Union delayed yet again, you may be wondering what it all means as an accountant for your business clients and, indeed, for you?

Although the EU has given Britain a flexible extension until 31 January 2020, meaning Brexit is not happening right this second, it is not going away.

So, what are the implications for UK firms? We take you through some of the key questions below.

You can also read our Q and A on understanding the political process here and what we’ve done for our software here

When has Brexit been delayed until?

31 January 2020

What now?

Brexit is effectively on ice and while we have a General Election.

What will the impact of Brexit be for my business clients?

This all depends on how we leave, what type of business you run, and who your customers are. There is still potential for a no-deal outcome at some stage – either on 1 February 2020, if no Withdrawal Agreement is ratified, or 1 January 2021 following a transition period, if talks about trade and the future relationship collapse.

What would a no-deal mean for businesses?

The biggest changes for business would most likely occur in that scenario. The Government has issued numerous notices to business about the changes required if that were to happen. However, both sides have clearly stated they want to avoid this and if the new Withdrawal Agreement drawn up by the EU with Prime Minister Boris Johnson is ratified, the UK will enter a transitional period.

Would rules stay the same in the transition period?

Yes. All rules will remain the same until December 31 2020 at the earliest, if not longer. That’s because the transition phase could be extended by up to another two years.

Should we expect big changes in business law immediately after we leave?

No. No laws will change substantially – at least in the immediate term. That is mainly due to the stipulations in the The European Union (Withdrawal) Act from 2018. These state the Government aims to incorporate all EU laws into UK law as an initial step. The BBC has reported that there are currently about 12,000 EU regulations in operation in the UK. The Government plans to copy over the vast majority of them word-for-word into UK law. At some point down the line, however, whoever is in power will have the option and ability to legislate for any number of changes to be made and to repeal or amend these laws that originated from EU membership.

What about changes to employment law and workers’ rights?

One of the big battles surrounding the Withdrawal Agreement Bill is over workers’ right and employment law. Under Boris Johnson’s deal, Labour claims existing levels of protection for employees under EU rules could be eroded, though the Government has said they could actually be raised even higher. So, businesses will want to keep a close eye on developments in this area, which could have a big impact on how they employ staff and HR-related legislation.

How does a business comply with UK accounting and reporting requirements after Brexit?

When it comes to preparing annual accounts, the Government has stated the following: “All companies will need to use ‘UK adopted IAS’ instead of ‘EU adopted IAS’ for financial years beginning after the UK leaves the EU. Both sets of standards will be the same on the day the UK leaves the EU. There may be differences later if the UK adopts or amends standards and the EU does not.”

Further details are here

Will VAT rules be changing immediately after Brexit?

No. According to the Government’s technical notices, the VAT rules relating to UK domestic transactions “will continue to apply to businesses as they do now”.

Could some changes to VAT be coming down the line?

Possibly. In a no-deal scenario, the Government said its aim “will be to keep VAT procedures as close as possible to what they are now” to “provide continuity and certainty for businesses”.

But it will mean “some specific changes to the VAT rules and procedures that apply to transactions between the UK and EU member states”.

Ultimately, VAT rules, as with all laws and legislation across every area of life, could be changed in a post-Brexit world. It will be up to the Government of the day to decide what changes and policies it wants to pursue.

Further details can be found here.

Will GDPR data protection rules still apply after Brexit?

Effectively, yes. The Government has said that the EU Withdrawal Act retains the GDPR in UK law, even in the event of no deal. The Government said there would be “no immediate change in the UK’s own data protection standards” in that event.

It has stated: “The fundamental principles, obligations and rights that organisations and data subjects have become familiar with will stay the same.”

But it will have the power to make “appropriate amendments to ensure that it works effectively in a UK context”.

Will the rules for auditing UK companies operating solely in the UK change after Brexit?

No. However, UK companies operating in European Economic Area (EEA) countries will need to meet regulations in those countries.

How might Brexit affect Companies House?

The Government says Brexit will not affect how most UK companies report information to Companies House. However, it has stated that if we leave without a deal, an organisation may need to change its company registration if it is:

1. a European entity formed under EU law

2. a UK company with an EEA corporate officer

3. a UK company involved in a cross border merger

4. an EEA company

Also, post-Brexit, some European entities formed under EU law will no longer be able to be registered in the UK. These entities are:

• European public limited liability companies, known as ‘Societas Europaea’ (SEs)

• European Economic Interest Groupings (EEIGs)

• Making arrangements before the UK leaves the EU

Will the usual Companies House forms remain the same if we leave with no deal?

No. A number of Companies House forms will no longer be deemed compliant. In this instance, if those existing forms are filed, they will be rejected by Companies House.

Companies House has issued a range of new forms and a list of these can be found below. One exception are forms AA01 and LLAA01. Both are used to shorten or extend an accounting reference date.  

Regarding the Confirmation Statement, officials have said there will be minor changes to references in sections C1 and C3 of the CS01 form which refer to regulated markets outside the UK.

Proposed Revised Companies House Forms:

Corporate officers

Form

Name

IN01

Company Incorporation

LLIN01

LLP Incorporation

AP02

Corporate Director Appointment

LLAP02

Corporate LLP Member Appointment

AP04

Corporate Secretary Appointment

CH02

Change of Corporate Director Details

LLCH02

Change of Corporate LLP Member Details

CH04

Change of Corporate Secretary Details

What happens to any of my staff who are EU citizens?

The current proposals mean that EU citizens who have been living in the UK for five years or more continuously, and started living here by 31 December 2020, are eligible to receive ‘settled status’ – allowing them to remain here permanently if they wish.

The Government states that: “The rights and status of EU, EEA and Swiss citizens living in the UK will remain the same until 30 June 2021, if the UK leaves the EU with a deal.”

Full details on the criteria and definition of settled status can be found here.

What do businesses that import or export to the EU need to do if there is a no-deal Brexit?

An essential matter is to sort out your firm’s EORI number. You’ll need an EORI number that starts with GB to move goods in or out of the UK.

Failure to obtain one may mean increased costs and delays, the Government has warned. For example, if HM Revenue and Customs cannot clear your goods you may have to pay storage fees. If you already have an EORI number that starts with GB, you can continue to use it. It will be 12 digits long. If you’re registered for VAT it will include your VAT registration number.

If you use post or parcel companies to move goods, they will tell you if you need an EORI number. The Government website adds that firms will not usually need an EORI number if they only provide services; move goods between Northern Ireland and Ireland

For more information and to apply click here

For more information on Brexit from Keytime, click here

For more updates on Brexit, you can subscribe to the Government’s Brexit news alerts here

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