6 steps to getting your business ready for Brexit
The clock is ticking to Brexit and there are now less than 100 days until we exit the European Union. For startups the potential changes this could bring, coming so soon after the disruption caused by COVID-19, will present another huge challenge.
Against this backdrop one of the country’s leading legal firms, who support ambitious businesses from start up to scale up, have produced a guide on what businesses can do NOW to get ready.
Harpers James Solicitors’ Preparing For Brexit provides a one-stop-shop to advice all entrepreneurs should read.
Sharing the report with Startups Magazine, the firm’s CEO, Toby Harper, said: “There are many things businesses can do now to better prepare themselves for the big challenges Brexit will bring for many.
“As well as being proactive in looking at how your business can be affected it is vital entrepreneurs will receive clear and regular support from the Government. Businesses hate uncertainty so being prepared for Brexit will be absolutely vital."
So what should your business be doing now to get ready for Brexit? Here, Harpers James Solicitors guide you through the six steps companies should be looking at between now and 1st January. Commercial partner and Brexit expert, Sarah Gunton provides detailed advice on how firms can best prepare.
1) TAX, TARIFFS and CUSTOMERS
From 1st January 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.
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.
What can you do now?
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 said:" 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 1st January. 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
Startups must audit their supply chains to check which goods or services are procured from the EU.
What can you do now?
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.
Gunton said: "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 31st December."
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 30 June 2021. A new points-based system for sponsored workers will be coming into effect from 1st January 2021. This will cover EU and non-EU migrants alike.
What can you do now?
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 said: "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."
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 startup finances.
What can you do now?
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 said: "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 1st January 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.
What can you do now?
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.
6) Look to new markets
Brexit may cause some UK startups 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.
What can you do now?
The Department for International Trade is actively encouraging small businesses to test out new international markets: find out more here.
Gunton said: "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 contract 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."