Is your small business Brexit ready? Everything you need to know

The delayed Brexit deal is ramping up pressure on small businesses, which now warn trading delays, disruption and extra pressures from 1 January are inevitable. 

Emma Jones, founder of leading small business support network Enterprise Nation, said the majority of business owners who trade through Europe have little hope of being ‘Brexit ready’ by next month without clarity from Government on the terms of a deal. 

Meanwhile, a pop poll carried out by funding platform MarketFinance revealed a whopping 79 per cent of the 5,000 UK business owners they surveyed now lack faith that a deal with the EU will be struck in the coming days. 

‘The longer this goes on, the less likely it becomes that small businesses will be anywhere near ready for Brexit,’ Jones said of the ongoing negotiations, which were originally scheduled to be resolved at the start of this week.

The UK left the EU on 31 January 2020. On 31 December 2020 it will leave the EU single market and customs union and from 1 January 2021 new rules will apply

The UK left the EU on 31 January 2020. On 31 December 2020 it will leave the EU single market and customs union and from 1 January 2021 new rules will apply

The end of the year is fast approaching and with it the end of the ‘transition period’ for the UK to officially leave the European Union.

Trade talks between the UK and EU have dragged on past multiple deadlines leaving information and guidance still unclear in some areas.

What is clear is that once the UK exits the transition period, with or without a deal, the UK will leave the EU single market and customs union and new rules will apply in areas including trade in goods and services, immigration, and travel. 

While it’s not possible to be comprehensive at this stage, This is Money has nevertheless pulled together a guide on what we do know and how business owners can get as up to date as possible. 

The Government website has all the information so far on what you need to do to be Brexit ready but the Federation of Small Businesses and Enterprise Nation also have advice and toolkits to help you prepare. 

Jones said all businesses that export, import to the EU and Northern Ireland or employ staff from the EU will need to brace and expect delays and disruption initially.

‘There are steps that need to be taken now to avoid increased administrative costs such as getting compliant data protection safeguards in place, applying now for work permits or registering as a visa sponsor for EU staff as well as checking professional qualifications will still be valid to practice in the EU,’ she said.

Enterprise Nation founder Emma Jones said small businesses should brace and expect delays and disruption initially

Enterprise Nation founder Emma Jones said small businesses should brace and expect delays and disruption initially

‘It’s also vital to make sure the business is as fit and ready as possible. Maintaining a healthy cashflow and getting paid on time has always been challenging for SMEs and as we head out of lockdown and into Brexit, it’s inevitable that these pressures are only going to increase.

‘So, it’s more important than ever for businesses to get on top of the finances and make sure they can cover any and every scenario over the coming months, some of which will be beyond their control.’ 

While the changes may not affect every business, it is worth checking them over as they may do in the future. 

Action must be taken now for businesses and individuals that import goods from the EU, export goods to the EU, move goods to or from Northern Ireland, are staying in the UK if you’re an EU citizen or you employ EU citizens.  

If your business or organisation receives personal data from the EU/EEA, there are steps you need to take now. Everyone will need to adhere to new rules regarding travelling to Europe for business purposes. 

Unlike other parts of the UK, Northern Ireland will continue to follow EU single market rules for goods and agriculture, and will continue to apply rules of the EU’s Union Customs Code. This will mean some changes to trade between Great Britain and Northern Ireland. 

Importing goods 

The UK government’s Border Operating Model is the plan detailing the processes and systems, across all government departments, that will be used at the borders of Great Britain from 1 January 2021.

This means the process for importing goods from the EU will change. As is done when important goods from the rest of the world, you will need to make customs declarations. 

These are details the ensure the right import duty and VAT are applied. You can make the declarations yourself, but most businesses use a courier, freight forwarder or customs agent.

In some situations, you can delay making a declaration for up to six months after you imported the goods. You can also apply for consignee status if you regular import goods using common transit. 

Import VAT

VAT will be levied on consignments of EU goods exceeding £135 in value following the same rates and structures as are applied for the rest of the world imports.

VAT-registered importers will be able to use postponed VAT accounting and different rules will apply to consignments valued less than £135.

Import licences or certificates may apply for certain types of goods. This includes animal products, plants, wood packaging, chemicals and certain gases, just to name a few. 

You might also need to pay an inspection fee for some goods before they’re allowed into the UK. You can find a full list here.

For anyone importing excise goods to the UK such as alcohol, tobacco, and certain oils, the same rules as importing from the rest of the world apply.  

This includes making a customs declaration or in some cases, a Customs Freight Simplified Procedures which means you’ll be able to transport your goods without having to make a full declaration in advance.

There may be different rules in respect of Northern Ireland movements after transition but those will be published at a later date. 

There are also marking, labelling and marketing standards you must follow to import and food, plant seeds and manufactured goods.  

You should also check the rate of tax and duty you’ll need to pay on imports. The UK global tariff will apply to all goods, which replaces the current common external tariff. 

Exceptions apply to some goods including those from a country that has a trade agreement with the UK or those that have a relief or tariff suspension. 

Exporting goods 

The steps for exporting goods are similar to those for important goods but of course go in a different direction.

From 1 January, you will need to make a customs declaration when exporting goods to the EU, again either yourself or via a courier, freight forwarder or customs agent. 

From 1 January, you will need to make customs declarations for important and exporting any goods to and from the EU

From 1 January, you will need to make customs declarations for important and exporting any goods to and from the EU

Be sure to check what export licences or certificates you need and check the rules for exporting alcohol, tobacco and certain oils. 

As is the case with importing goods, there are also marking, labelling and marketing standards you must follow to export food, plant seeds and manufactured goods. 

From 1 January 2021, you can charge customers VAT at 0 per cent – known as ‘zero rate’ – on most goods you export to the EU. 

VAT is a tax levied on goods and services consumed in the UK and EU. When goods are exported they are ‘consumed’ outside the UK or EU and to impose VAT on such goods would be contrary to the purpose of the tax. 

Therefore, the supply of exported goods is zero-rated provided certain conditions are met. Check if you can zero rate your goods for VAT here.

Additionally, you may be able to use Common Transit to move your goods more quickly to the EU, Switzerland, Norway, Iceland and Liechtenstein. 

Another important thing to remember is that the business you are exporting to will also need to be Brexit-ready. Check they can make the necessary import declarations and that they have the appropriate licences or certificates. 

Businesses will also need an EORI number starting with GB to import and export goods from the EU but also to move goods between England, Scotland and Wales and the Isle of Man from 1 January. 

Not having one could see you face increased costs and delays. You may also need a separate EORI number if you move goods to or from Northern Ireland. 

For companies providing a service to countries in Europe, the Government has released location-specific guides which can be found via Enterprise Nation here. The network has also put together sector by sector guidance. 

It’s worth familiarising yourself with these terms, compiled by the Federation of Small Businesses, that will no doubt pop up more frequently as you take action to be Brexit ready. 

Key terms checklist 
Customs declaration Details the goods that are being imported or exported, to ensure the right import duty and VAT are applied. It often includes commodity codes and any necessary licences. You’ll need to make a customs declaration when you import goods from the EU from 1 January 2021. You can make a declaration yourself, or appoint someone to deal with it on your behalf.
EORI number  You need an EORI number that starts with GB to import goods from 1 January 2021. You’ll need an EORI number from an EU country if your business will be making declarations or getting a customs decision in the EU. Get this from the customs authority in the EU country where you submit your first declaration or request your first decision. 
UK Global Tariff  This will replace the current common external tariff. It will apply to all goods you import from 1 January 2021, with a few exceptions. 
Commodity code  A 10-digit number used to classify goods that are imported or exported from outside of the EU. 
Zero rate  From 1 January 2021, you may be able to charge customers VAT at 0 per cent on most goods you export to the EU. 
Points-based immigration  The new points-based immigration system will introduce job, salary and language requirements that will change the way you hire from the EU. You’ll need a sponsor licence to hire most eligible employees from outside the UK. This does not apply to Irish citizens.  
EU Settlement Scheme  If you’re an employer, you may have employees who need to apply to the EU Settlement Scheme to continue living in the UK.
Source: Federation of Small Businesses 

Moving goods to and from Northern Ireland

From 1 January 2021, a different policy called the Northern Ireland Protocol, will take effect, at which point customs declarations as well as safety and security declarations will be needed for goods moving from Great Britain to Northern Ireland.

This ensures tariffs are not paid on trade within the UK, Northern Ireland can benefit from UK Free Trade Agreements and goods destined for Ireland pay tariffs when they should.

The Trader Support Service will support companies with the changes to Northern Ireland trade. This free-to-use service will provide guidance and training, a digital service to support declarations, and support from customs experts. You can sign up to the service here.

EU citizens in the UK

If you’re an EU, EEA or Swiss citizen, you and your family can apply to the EU Settlement Scheme to continue living in the UK after 30 June 2021. You can also apply if you’re the family member of an eligible person of Northern Ireland.

EU citizens can apply to the EU Settlement Scheme to continue living in the UK

EU citizens can apply to the EU Settlement Scheme to continue living in the UK

In some cases, you may be able to stay in the UK without applying – for example, if you’re an Irish citizen or already have indefinite leave to remain. You can apply here.

If your application is successful you will be given ‘settled status’ or ‘pre-settled status’. The result will depend on how long you have been living in the UK and your rights will be different depending on which you get.

Either way, you will be able to work in UK and travel in and out of the UK. 

You can stay in the UK as long as you like if you get settled status. You’ll also be able to apply for British citizenship if you’re eligible.

If you get pre-settled status, you can apply to get settled status if you reach five years’ continuous residence in the UK. For more information on statuses click here. 

A new immigration system will apply to people arriving on or after 1 January 2021. Under the new points-based immigration system, anyone coming to the UK for work must meet a specific set of requirements for which they will score points. 

A total of 70 points is needed to be able to apply to work in the UK. Visas are then awarded to those who gain enough points. 

Points can be gained by a range of mandatory and ‘tradeable’ factors such as a job offer from an approved sponsor or being able to speak English at a required level.  

Here are two examples of skilled workers who will have enough points to work in the UK. 

This points assessment shows a mechanical engineer coming to the UK with salary offer of £26,750. The “going rate” salary threshold for the profession applies.

This points assessment shows a lab technician with a STEM PhD coming to the UK with salary offer of £21,000. The general salary threshold applies.

Here are two examples of skilled workers who will have enough points to work in the UK

Non-UK citizens can also work in the UK via the global talent route or graduate route as well as via intra-company transfer (ICT). 

Meanwhile entrepreneurs can take the startup and Innovator routes which are designed to attract entrepreneurial talent and innovative, scalable business ideas to the UK. 

Startup is for those setting up an innovative business for the first time, and innovator is for those with industry experience and at least £50,000 funding. 

These routes will be open to both EEA and non-EEA citizens. Applicants can be individuals or teams. For more info and for other routes, click here.

Remember, the new immigration system will not apply to EU citizens living in the UK by 31 December 2020. They will have to apply to the EU Settlement Scheme.

UK employers recruiting overseas 

Similarly there are steps employers can and must take to equip them with the right materials and information to support EU citizens to apply to stay in the UK.

The Government has provided template letters for employers to give to EU citizen staff. 

Additionally, if you are planning to recruit from overseas from 1 January, you will need to register as a licensed visa sponsor. You may not be able to legally hire people from outside the UK without one. 

New employers from outside the UK will need to meet new job, salary and language requirements as laid out above. Irish citizens and those eligible under the EU Settlement Scheme are not affected.

To get a sponsorship licence, you cannot have unspent criminal convictions for immigration offences or certain other crimes, such as fraud or money laundering. 

The licence will vary depending on whether you are sponsoring a job applicant for general purposes, or for the purpose of an ICT. You can apply for a licence covering either or both. 

You need to appoint people within your business to manage the sponsorship process when you apply for a licence using the sponsorship management system. 

The Government defines small businesses if the company’s annual turnover is £10.2million or less and employs 50 employees or fewer. Current sponsorship fees, which are subject to change, are as follows.

The Government defines small businesses as having an annual turnover of £10.2million or less and employing 50 employees or fewer

The Government defines small businesses as having an annual turnover of £10.2million or less and employing 50 employees or fewer

What about freelancers? 

As is the case with British businesses, British freelancers have a lot to think about ahead of the UK’s departure from EU single market and customs union.

The biggest difficulties will come for the many freelancers who contract with EU companies. For example, from 1 January, UK nationals will only be able to travel in the EU for 90 days out of 180, which could affect contractors wanting to work with EU clients in person.

All freelancers working with EU clients will also now have to comply not just with one EU-wide set of working rules but with each country’s particular guidelines, which may take some research. 

Freelancers working on long contracts with clients may also need to pay social security in their country instead of National Insurance here – which they will need to research too.  

For travel – even meetings with EU clients – freelancers will need to apply for a European Travel Information and Authorisation System (ETIAS) waiver for €7. 

From next year, you’ll also need health insurance because EHIC cards will no longer be valid.

To keep UK freelance businesses afloat and thriving, we believe the Government should also create a specific visa route for freelancers to work in the EU.

Ryan Barnett, economic policy adviser at IPSE, the Association of Independent Professionals and the Self-Employed, said: ‘Because freelancers do not have the security of a permanent role, they are more exposed than others to the economic headwinds from Brexit.  

‘There are many key points that will be worked out in the coming weeks – unfortunately giving freelancers little time to prepare – to do with issues such as data imports from the EU and whether UK professional accreditations will still be recognised in all states.  

‘The Government has done nowhere near enough to make this a quick or simple process for the UK’s vital freelance workforce.   

‘There are gaps in the Brexit transition checklist and freelancers are still having to wade through masses of technical detail. There needs to be a support hub and dedicated advice. 

‘To keep UK freelance businesses afloat and thriving, we believe the Government should also create a specific visa route for freelancers to work in the EU. 

‘So far, there has been precious little to support freelancers through this process: it’s time it stepped up.’

Freelancers who pay VAT on work in the EU through the MOSS system will need to reapply after 1 January. 

European domain pain 

Bird & Blend Tea Co, operates 11 stores across the UK, and sells worldwide online, with the US as its biggest international market.

Founder Mike Turner said having already worked with countries outside of the UK means his business has a headstart for when the changes come into effect on 1 January.

He said: ‘We buy ingredients from all around the world so it will just be like flicking a switch and importing from the EU will just be like we have always imported from elsewhere. 

‘It’s the same on the export side. It’s just a case of changing our labels and making customs declarations. It could impact our customers on the receiving end but we are making sure to inform them as best as we can.’

Bird & Blend Tea Co founder, Mike Turner, said he has a headstart as his small business already imports and exports to and from countries outside of the European Union

Bird & Blend Tea Co founder, Mike Turner, said he has a headstart as his small business already imports and exports to and from countries outside of the European Union

Mike is more concerned about Northern Ireland, where rules are still unclear. Again, he said this should be a fairly straightforward change though he would like some clarity soon rather than having to rush around Christmas week.

He added: ‘We do have some fairly significant suppliers in Europe so there is a bit of a worry in terms of delays. We assume borders will be a nightmare so have stocked ourselves up a little. 

‘By mid-February we hope things will be running a little better.’ 

One thing Mike has had issues with, and which is something many small businesses might not consider but should if they want to think about future growth, is ownership of European website domains.

Bird & Blend Tea Co would have been set to lose ownership of some of their domains including ‘.eu’ and ‘.fr’ by 1 January had it not come up with a solution.  

‘There has been conflicting advice about what to do on that,’ Mike said. ‘It’s something that might seem little but it has caused us a headache. 

‘People from France can still shop on our .com website but if one day we wanted to expand in the EU it could cause a real issue. 

‘We have managed to keep hold of around 10 domains we could have lost, but it has cost a lot of time and money.’

Small Business Essentials

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