As of 31st January 2020, at 11pm, the Brexit ball properly starts in motion, which means that free trade in goods and services across the EU is going to change. And, with this looming on the horizon, many small business owners have started to wonder, what will the impact of Brexit on small businesses be?
If you find yourself trying to break through the noise to try and find out about Brexit and small businesses, we’re here to help. At SixtyFour8, we’ve created this guide to tell you all you need to know at this stage.
What is Brexit?
As a result of a referendum that took place in June 2016, the UK voted to leave the EU and after much negotiation over 3 years, the deadline’s been set in stone for 31st January 2020. Then as of the 1st February, the UK will enter a transition period until 31st December 2020. During this transition phase, the UK and EU’s trading relationship will remain the same while a free trade deal – among other things – is negotiated. It’s the government’s hope that during this time a new trade deal can be negotiated and if this is the case, the new deal will take effect as of 1st January 2021.
Which industries will be most affected?
For some industries, the impact of Brexit on small business will be considerable, particularly if any of the following applies to you or your business:
- Importing or exporting goods or services to the EU
- Traveling to the EU
- UK citizens living and working in the EU
- Citizens from the EU that are living/working in the UK
If you don’t fall into any of these categories but are still concerned about the effect of Brexit and your small business, HMRC has a Brexit checklist tool that can help. Simply answer a few questions about your current circumstances and you’ll receive detailed information on what’s set to change in your industry and additional information on rules and regulations.
What’s set to change once the UK exits the EU?
Once the UK makes its exit, there are certain things which will need to be re-evaluated, such as:
- Import and export of goods/services to and from the EU, including VAT payments
- Employment of both EU citizens working in the UK and UK citizens in the EU
- Grants, state aid and block exemptions
- Transport and logistics
- Product safety, eco-compliance and packaging and labelling that is EU-licensed
- Copyright, patents and trademarks
- Environmental industrial standards
- Personal data and how it’s transferred between the EU and UK
- Qualifications and licenses and how they’re mutually recognised in the EU/UK
What if there’s a no-deal Brexit?
In the event that there’s a no-deal Brexit, the UK will become a “third-country” in the eyes of the EU, meaning the UK will be treated the same way as countries without free trade agreements. The UK Treasury have outlined a no-deal Brexit contingency plan referred to as “Operation Yellowhammer”. In the document, it also lists some of the worst-case scenarios for businesses:
- HGV’s may face blockages at EU ports as they may not be ready for French customs requirements. Delays of up to 2 and half days may occur
- Those that travel on business or UK nationals working in the EU may be subject to immigration checks and could lose rights and healthcare coverage
- Price increases for business energy, such as gas and electric, may occur
- Cross-border financial services may be disrupted
- Data to and from the EU that is protected by GDPR is likely to be affected
- Fuel availability could be affected, particularly in London and the South East due to panic buying
- Small businesses may find it difficult to get finance if there’s a disorderly Brexit, as banks could be less willing to lend
Can I still employ EU citizens after Brexit?
Yes, if they’re already living and working in the UK it should be relatively straightforward. If your employees have been living in the UK for 5 years or over continuously, EU citizens will be required to apply for a “settled status”, which is an indefinite leave to remain.
If they’ve been living in the UK between 6 months and 5 years by 31st December 2020, then they can apply for pre-settled status instead. Both a “settled status” and “pre-settled status” will give individuals the right to continue to live and work in the UK after Brexit.
Whilst we wait for Brexit to inevitably roll in and determine the true impact of Brexit on small businesses, it’ll be a good idea to keep an eye on the Brexit headlines, as all business changes will be communicated well in advance, giving you plenty of time to prepare. Looking for more accounting news and information? Read our guide to CIS Tax Returns and Refunds for Construction workers, next.