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31 October 2019

No Deal Brexit – Will your Business’s competitiveness be eroded?

Forward Thinking Business Blog –

Since Boris Johnson assumed the role of Prime Minister in the UK, the prospects of a no deal Brexit have increased markedly with Mr Johnson guaranteeing exit from the EU on 31 October ‘do or die’. Whilst he has emphasised that he’d prefer to leave with a deal, it would appear he is willing to do so without one to achieve these objectives. We acknowledge that we do not know with any great certainty what will happen in the short term – whether tariffs and checks be applied from day one, what precisely will happen on the Irish border, and so on, but we do know what no deal ultimately means. It means that the UK will no longer be able to trade as it does now with the European Union. That as a ‘third country,’ the UK will see checks and tariffs/VAT applied to its products at the EU border.

The UK government has announced that in a ‘no deal’ scenario it would introduce postponed accounting for import VAT on goods brought into the UK. This means that UK VAT registered businesses importing goods from the EU and non-EU countries to the UK would be able to account for import VAT on their VAT return, rather than paying import VAT on or soon after the time that the goods arrive at the UK border. The Irish Government have recently announced that they too will introduce postpone accounting for import VAT to support trading with the UK.

In terms of Northern Ireland companies selling to the Republic of Ireland, depending on the goods, additional tariffs may become payable by the customer in the Republic of Ireland (the importer) coupled with the unenviable completion and submission of customs declarations. Without taking into account volatility of exchange rates, labour issues, regulations/certifications, labelling etc., these factors alone, both increased costs and administrative burdens, may mean that, many businesses in Northern Ireland will no longer be able to export to the Republic of Ireland as their competitiveness will be eroded.

‘In order for your business to remain competitive in a post Brexit world, it may be worth considering a review of your current operating structure’ says Michelle Hawkins

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It is forecast that EU tariffs could cut Northern Irish exports to Ireland by 11 per cent while non-tariff barriers could prompt a further decline of 19 per cent, equating to a total fall in exports of up to £180m.

In order for your business to remain competitive in a post Brexit world, it may be worth considering a review of your current operating structure and consideration given to establishing an additional trading entity in the Republic of Ireland. There are a number of methods by which this could be achieved however, careful planning would be required to ensure that the structure implemented suits the business’ requirements from both a commercial and taxation perspective with due care and consideration be given to management and control. Businesses may also need to review potential opportunities for strategic partnerships with other businesses operating on the Island of Ireland or indeed possible mergers. It is important that every business understands their business operations and not only the impact that Brexit could have on their own trade but also on their customer’s trade. It has been reported that only 41% of businesses have a Brexit plan in place, now is the time to act.

The advice above is specific to the facts surrounding the questions posed. Neither PKF-FPM nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.

Contact Michelle

Michelle Hawkins / Director

m.hawkins@pkffpm.com

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