Post-Brexit rules for SMEs: What will change for businesses in 2021?

The free trade deal between the UK and EU, which was announced on Christmas Eve, has taken effect from January 1

Post-Brexit rules for SMEs: What will change for businesses in 2021?

The free trade deal between the UK and EU, which was announced on Christmas Eve, has taken effect from January 1

The UK has officially left the transition period which ended on December 31, which means trade with Europe has drastically changed. Businesses are now preparing to adapt to the new changes and even more so, during the height of the pandemic. However, many firms have pleaded for a grace period to allow them to adjust to the new measures during coronavirus, which has severely impacted businesses. What do businesses need to do differently now? 

After Brexit, the UK will no longer be following EU’s rules on product standards. Meanwhile, strict EU laws on animal products will also mean some UK products can no longer be exported. COVID-19 has made preparations more challenging as firms adapt to new measures. Businesses will now need an Economic Operators Registration and Identification number (EORI) import and export goods into England, Wales or Scotland. If they move goods to or from Northern Ireland they may need an EORI number that starts with XI. However, if the UK has a trade agreement with the country a firm is importing from, they may be able to pay less duty or no duty on the goods, known as a ‘preferential rate’.  

Employees must now take extra steps travelling to the EU for business. Workers may need a visa, work permit or other documentation if they are planning to stay for longer than 90 days if they are transferring from the UK branch of a company to a branch in a different country, known as an intra-corporate transfer, carrying out contracts to provide a service to a client in another country which your employer has no presence or providing services in another country as a self-employed person. 

Lastly, if firms are planning to recruit workers from overseas, they will need to register a license via sponsor. New employees from outside the UK are required to meet new job, salary and language requirements. Irish citizens and those eligible under the EU Settlement Scheme are not affected. However, firms will also need to look at changes affecting manufactured goods, such as new marking requirements or approvals needed to ensure they are ready to sell them in the UK and EU. 

Under the Brexit agreement, which has come into force on January 1, VAT is now being collected at the point of sale rather than the point of importation. EU businesses are enraged because they will now be facing higher costs and will be forced to comply with UK tax authorities. 

However, some EU specialist online retailers said they will no longer deliver goods to UK customers because of tax changes caused by Brexit. Several small businesses have stopped sending supplies to the UK to avoid customs declarations and registering for VAT. Several customers realised this change was implemented after trying to place an order online and finding out the UK was no longer an option for delivery.

A government spokesperson said: “The new VAT model ensures goods from EU and non-EU countries are treated in the same way and that UK businesses are not disadvantaged by competition from VAT-free imports.  

“The new system also addresses the problem of overseas sellers failing to pay the right amount of VAT on sales of goods already in the UK at the point of sale, raising an anticipated £300m every year.

“Many EU businesses which currently sell goods to UK customers will have already registered for UK VAT under existing rules and HMRC is working very closely with those who haven’t to ensure they can comply with the changes.” 

Following the end of the transition period and a new lockdown announcement, businesses are now faced with overwhelming uncertainty about what the future will hold. The government must step up to the table and help businesses by giving them time to adapt to the new changes during these difficult times.

Latifa Yedroudj
Latifa Yedroudj

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