Anu Tayal shares insight following our Brexit breakfast seminar
On Wednesday 14 November 2018, in the calm before the Brexit storm that has encircled the Prime Minister, a selection of panellists from Stevens & Bolton, Santander and the VAT Consultancy joined Roffe Swayne. They all shared their views on some the implications and things for SME companies to think about, regardless of the outcome of negotiations, ahead of 29 March 2019.
Here are some of the hot topics coming out of the session:
Preparation: Understand where you are exposed
- Understand your customers, suppliers and logistics. It is key that you review the relationship you directly (or indirectly) have with the EU and how it impacts you. For example, consider your supply chain, including how you will get your critical items, clearing customs. Do you need a third party freight handler for this going forward?
- Make financial contingency plans. Your normal cash flow cycles may be disrupted; either by the need to forward purchase stock or through delays payments however so caused. Having conversations early with financiers are likely to result in a more favourable outcome; and certainly one that is likely to be less stressful that being ‘late to the financing party’. Furthermore, given the volatility of the pound, does it make sense to hedge foreign exchange?
- Train your team and familiarise yourself with new systems and procedures that you will be required to follow after Brexit.
Look at your labour force and try to identify where there are likely to be problems. Either through the rights of EU nationals work and stay and/or the ability to continue to recruit, particularly into labour intensive industries. Employers have a number of options open to them to help their overseas team to gain the right to work and stay in the UK. These include:
- Assist your EU staff to apply for ‘settled status’, which is an online system for those members of your team to apply for an ‘indefinite leave to remain’ if they have been in the UK for at least five years. It costs £65 per adult and so within the range of most applicants. That said, it does require a legitimate employment history in Britain. Also, be aware that family ties may have an impact on an individual’s desire to stay.
- If the EU citizen has been in the country for less than five years, then typically the individual will require a Tier 2 visa. For application the individual requires an income of £30,000, obtaining a certificate of sponsorship from his/her employer and paying £200 per year as a healthcare surcharge. This a bar that many EU citizens at the unskilled labour end of the spectrum may struggle to reach.
- The other route is to apply for ‘permanent citizenship’, but the individual must have legally resided in the UK for more than six years. This process is significantly more complicated.
- Ultimately it’s better to try and retain the staff you have, it’s very possible that such people will be harder to find in a post hard Brexit scenario.
Review your contracts and consider what changes are required.
- For example you may wish to renegotiate contracts to mitigate certain risks, including rights to termination, GDPR, whose risk is currency fluctuations, adverse change clauses and for whose responsibility it will be to obtain customs clearances.
- Involvement in EU projects and the impact to your contracts. Will you be able to participate long term, and at what level? It could be anticipated that for services pertaining to EU security that longer term arrangements will be possible, but as one diverges from that, it is likely to be more and more restrictive.
- Replacement of existing EU state aid packages that you may benefit from; and the impact that might have on the way you are able to charge for your services/goods.
Consider whether having a base in the EU would be good for your business.
- Would it be easier for your customers/suppliers to continue to trade with you if you had permanent establishment in the EU? This is a complex area, not least as it gives rise to a number of considerations (VAT, withholding taxes, employment etc.) but it may be the optimal route for your business.
- Is it better to set this up yourself or to acquire an established business? Thus giving you an increased footprint as well as the inherent in-house knowhow.
Finally, don’t rely on your customers and suppliers to know the answer. It is recommended that each business be ‘the front end of the wedge’. Drive the conversation and solutions to minimise the impact on your business.
If in doubt, advisers can help you think about preparing for the Brexit process, taking you through the implications for your business. If you plan for the most difficult scenario, hopefully we will all be surprised on the upside. The converse will no doubt be more difficult to manage with a potentially greater impact.