Updated: Aug 25, 2021
Post-Brexit it will take considerably more effort, time and money to get your goods across and offer your services to the 27 EU countries and their 80+ EU trading partner nations. Equally, the preconditions for finding new clients and tapping into new markets will become more challenging too.
Therefore, leaving the EU will impact your business but there are ways to mitigate these risks. The most crucial ones are:
Tariffs & Duties
As it stands you will have to pay tariffs (and possibly excise duties for alcohol, tobacco etc.) on exports to EU countries. Besides, your goods might not meet EU origin requirements anymore and therefore will be subject to additional customs duties.
The cost of tariffs and duties might prove insignificant to the time and cost you need to spend on customs declarations (see also: https://www.gov.uk/guidance/trading-under-wto-rules). You can save resources by sending fewer but larger consignments.
You will have to pay VAT on all exports to the EU. The VAT can be claimed back from the tax authorities in the country of destination – very likely in their native language. Again, this will absorb resources in your business in terms of cost, time and tying capital.
There are two ways to mitigate:
1) If you are selling B2B approach your trading partners about changing the Incoterms in a way that they will be responsible for paying and retrieving the VAT.
2) Try to use a EU country that offers a VAT deferment scheme (allowing you to pay VAT upon the SALE rather than the IMPORT of goods) as a bridge for EU exports. You would still have to complete the paperwork for the foreign VAT authorities. However, participating in such a scheme will free investment capital and substantially enhance your cash flow.
There are legal (e.g. for certification of some medical products or machinery) and economic reasons to move your distribution hub to the EU. This can be accomplished in two ways:
1) Finding national/European importers. The downside is you will have to sacrifice a substantial part of a) your profit margins and b) your control.
2) Alternatively, you can outsource the foundation and hosting of your own EU company. This allows you to control and manage your exports from your UK headquarters with – once the implementation is completed – only little disruption. This will make you independent in terms of decision making and paying a middleman.
To avoid being taxed twice, i.e. in the UK as well as in the EU, there are bilateral Double Taxation Agreements in place. In other words, once you have paid your taxes for your EU subsidiary (or independent company) in a European jurisdiction you can transfer these funds to the UK tax free. These agreements will remain regardless of Brexit.
Whilst exporting becomes tougher, at the same time this new situation also creates many new opportunities. Your competition faces the same difficulties, this is your chance to pro-actively gain new clients and markets giving your business a head start.
We hope this brief overview was helpful.If you would like a more detailed,in-depth assessment for growing your foreign markets or talk about the specifics of your business simply book a FREE business consultation.
For more information on trading from and to Europe please get in touch.
Trade with Europe Ltd provides one-stop solutions for UK businesses to export and grow European markets. Circumvent trade barriers and manage your EU trade from the UK with only minimal disruption to your everyday business.