In the current febrile political atmosphere, it sometimes feels as if we need a daily, if not hourly, weekly tax brief to keep you up-to-date with all that is happening with Brexit. Indeed, it would not be surprising to find that in the time that you take to read this piece everything will have changed again. But one thing is certain. UK businesses will not be shutting shop at 11.00pm on 29 March 2019. But how will they trade once we have left the EU?
The immediate concern is the post-Brexit customs process. Businesses that import or export goods to or from non-EU companies will already be registered with HMRC to enable them to accept customs declarations but those businesses whose trade is only with the EU don’t need to register, because there are no customs declarations on intra-EU movements of goods.
That will all change come Brexit. If there is a negotiated agreement then there will be an orderly transition but in the event of a no deal Brexit, UK businesses trading with the EU will need to be registered at the point at which we leave the EU, otherwise they will be unable to move goods in and out of the country.
HMRC first wrote to businesses who might be affected in September and has now written again with updated advice. The critical point is that these businesses will have to register with HMRC before the Brexit date. They cannot wait and see what happens between then and now.
Businesses wishing to trade with the EU will have to apply for an Economic Operator Registration and Identification [EORI] registration number. This can be done online. For businesses that are already VAT-registered the process is straightforward and is driven by the existing VAT registration number. But non-VAT registered businesses that trade with the EU will also be required to obtain an EORI. The process here is more complex – companies will for example need to give HMRC details of the legal status of the business, including the date on which their company was incorporated, which may not always be readily available.
More importantly, however, is how these non-VAT-registered businesses actually know about the requirement to obtain an EORI registration. There is no straightforward way for HMRC to identify such businesses and there must be a risk that they will fall through the net and face a nasty surprise on 30 March when they are unable to make a customs declaration and move goods into and out of the EU. HMRC are on the horns of a dilemma here. If they write to every UK business they would be accused of going over the top, because most of those businesses trade only in the UK. But by writing only to VAT-registered businesses they risk the message failing to get to the right people.
Perhaps by the time you have finished reading this, Christmas will have come early and everything will have been resolved amicably. But, on the assumption that the referendum and everything which has happened since was not a dream, businesses really do need to get themselves prepared for every eventuality. Registration for an EORI is a critical first step.
Andrew Hubbard is Tax Consultant and Brad Ashton, VAT Partner at accountants RSM