Brexit has caused wholesale changes to how businesses operate regarding international trade between the UK and the EU. Britain officially left the EU on the 31st of January 2020, but a transition period followed this that lasted for a year. Negotiations between the UK and the EU in the wake of Brexit resulted in a more than 1200-page agreement being written up to govern international trade, among other things post-Brexit. Here are some of the key things British businesses exporting to the EU should know about.
Tariffs
The withdrawal agreement adopted between the UK and representatives from the European commission hinged upon the rejection of tariffs for UK businesses buying from or selling to the EU. If charges had been introduced, it would have likely led to a higher cost for selling abroad, which would have reduced the ability of UK-based businesses to export their wares to the continent. This would have also increased the cost of imports from the EU, making goods in the UK more expensive in general.
EU Customs Union
While there are no tariffs in the withdrawal agreement, there is an issue associated with delays at borders. The UK is no longer a member of the EU Customs Union, meaning more stringent checks at borders between the UK and the EU. Many voiced fears about these changes before the end of the transition period. It appears they were correct to be concerned, as there has been evidence of increased delays in areas like Kent, where exports go to, and imports come from mainland Europe.
Leaving the EU Customs Union is likely one of the biggest hurdles businesses that export to the EU now face. When exporting fresh goods, delays at the border could be disastrous for businesses. Even if products do not expire, the increased paperwork and rules could increase costs for British businesses.
VAT
There have been some changes to the VAT rules for UK businesses that sell online post-Brexit. If products are exported from the UK, whether their destination is the EU or non-EU countries, they will be zero-rated regarding VAT. This means that the UK VAT is not charged at the point of sale.
Prior to June 2021, a low-value consignment relief programme was in place for goods worth less than €22 exported to the EU. This system is no longer in force, meaning that VAT and duty are now payable in the buyer’s country regardless of the consignment value.
Online Spending Habits
The habits of consumers in the UK and EU countries have changed dramatically over the past 18 months due to Covid-19. Before the pandemic, there was a general trend that showed online shopping was increasing each year. The coronavirus led to restrictions and lockdowns across the UK and Europe, which further accelerated the move towards internet shopping.
Additionally, Brexit will likely lead to a further increase in the popularity of online shopping. High street retailers have been struggling for some time because of the economic recession, and the combination of Covid-19 and Brexit will likely lead to more people shopping online to find the best deals.
Despite this increase, the UK no longer being part of the EU will likely lead to issues for consumers and businesses regarding buying and selling online. Not much is known about Brexit’s impact on this, and it remains to be seen what the full implications will be on online sales to the EU.
Regardless of the changes in online spending habits, if your business plans to continue or begin offering online shopping or digital services to EU countries, you must tailor content to your target demographic. This can include incorporating regional deals into your digital content or simply ensuring that your web design uses language suited to your target market, using companies like Brightlines Translations.
One-Stop-Shop (OSS) Return
The OSS return for UK businesses that are selling to customers in the EU is a way of reporting sales and VAT that simplifies the requirements for such companies. This takes the form of a single return that needs to be completed each quarter to declare and pay output VAT at the required rates on goods and services to consumers in EU member states. This return will then be distributed to each member state by the tax authority.
With OSS returns, it is essential to remember that your business cannot use this reporting system if your company holds stock inside the EU or uses the Fulfilment by Amazon programme.
Changes and Uncertainty
In summary, the withdrawal of the UK from the EU has caused a great deal of uncertainty for businesses that import and export goods and services from the economic block. While there is some knowledge surrounding changes (or lack thereof) to things like tariffs or VAT reporting, many of the implications on British business are, as yet, unknown.