The “Preparing your company for Brexit” Seminar took place in Rotterdam just 10 days before the original Brexit deadline of 29 March deadline. This was a seminar organised by PwC, the Rotterdam City Council and Rotterdam Partners, and gathered professionals from a wide variety of sectors from financial services to logistics.
With just over a week before the original Brexit date to go, it was clear that participants expect major disruption if the UK leaves the European Union next week without a deal. In fact, a majority of participants expect major problems in transporting goods to and from the UK after Brexit, regardless of when this occurs. In fact, only a small proportion of the participants, 12 percent, consider that they are adequately prepared for Brexit. The vast majority 57 percent were unsure that their preparations would be enough. Some 52 percent of the same respondents are also expecting disruption to transporting goods to the UK post Brext, and 68 percent are unsure whether the Dutch government is adequately prepared to help businesses to continue to do business with the UK in the immediate aftermath of Brexit.
Setting the scene, Jan-Willem Thoen, Tax Director and Head of PwC’s UK-NL Tax Team, outlined the political developments to date. The important take-away from this part of the presentation was that a ‘no deal’ is the default outcome.
This remains true even in light of the latest developments. The UK Parliament still needs to approve the Withdrawal Agreement next week in order for the UK to leave the EU with a deal on 22 May. Absent an approval, the UK will now leave the EU on 12 April without a deal. It remains to be seen how events over the next week pan out, but preparing for a no deal is a sensible approach.
The City of Rotterdam has certainly taken this very real risk of a ‘no deal’ scenario to heart when practically preparing for the logistical challenge that will occur as a consequence of Brexit. Rotterdam alderman for Economic Affairs, Barbara Kathmann, told the seminar that two hectares of land have just been paved in the port area in order to accommodate up to 400 parked lorries at the time of Brexit. Trade with the UK is important for both the port and the city of Rotterdam due to strong historic connections, hence preparations have been essential.
Sip van der Weg from the Dutch Customs authorities emphasised that from the moment the UK leaves the EU - whether on 29 March 2019 or 22 May 2019 - it will become a third country to other EU Member States. This means that customs formalities will apply, freight traffic between the UK and EU will be monitored and that customs and excise duties will be levied.
Given that 35,000 Dutch companies that trade with the UK today, have no experience of trading with a third country, this will be an extraordinary challenge. This is despite the fact that the authorities have acted according to the device “plan for the worst, hope for the best”, and have been working on implementing a ‘no deal’ scenario since March 2017 (when the UK submitted the Article 50 notification with the EU).
On the UK side, Jill Hawkins of Her Majesty’s Revenue and Customs (HMRC), explained how HMRC has also been preparing for a no deal scenario. The UK government objectives for the border post Brexit has been to maintain security, while facilitating the flow of goods and people, and protecting revenue and compliance with standards.
Given the complexity of the situation, HMRC has decided on a few so called ‘day one easements’ applicable in particular at roll-on roll-off borders. However in order to be able to continue to trade with the UK, companies are advised to make sure that they have:
applied for an EORI number,
made sure that they can complete each data field in the Customs Declaration,
agreed on responsibilities with their customs agent and logistics provider for each part of the process and updated their contracts to reflect this, and
identified the software to be used for submitting documents (unless they use a customs agent for this).
The movement of people will also be affected once the UK leaves the EU. In the case of a ‘no deal’, the Dutch Immigration and Naturalisation Service (IND) has set up a number of contingency measures to limit the adverse impact on UK nationals residing in the Netherlands, most importantly through a national transition period until 30 June 2020 whereby all UK nationals and their family members registered in the Dutch Personal Records Database (BRP) will maintain their lawful residence in the Netherlands.
The IND will invite UK nationals to submit an application for a new residence permit valid post Brexit, during the transition period. The new residence permit will be a national residence permit and will thus not guarantee freedom of movement within the wider European Union. The new residence permit may be permanent or temporary for a period up to five years.
Other consequences of Brexit include considerations for audit, legal, tax and VAT.
For your audit the most important aspects to keep in mind is about risk disclosures and impairments mainly due to increased country risk and potential share price and FX volatility.
Tax wise the things to watch are dividend withholding tax, the transitional Dutch tax law which states that for the tax year 2019, the UK will be treated as if it were still part of the EU, as well as applicability of ECJ jurisdiction for trade with the UK.
VAT wise there will be a border with the UK meaning that the intra-Community Trade system will no longer work with the UK and import VAT becomes due rendering ERP and invoicing changes necessary.
From a legal perspective, issues to consider are how the EU is referred to as a territory in your contracts and whether this will include the UK after brexit, as well as the execution of those contracts and whether Brexit can be said to constitute a force majeure.
It is important to remember that in a Brexit context, nothing is agreed until everything is agreed, and that the default outcome remains a ‘no deal’ scenario. Businesses in the UK and EU therefore need to urgently activate their no deal plans, but remain prepared for a deal scenario as well. For those who haven’t started implementing no deal actions, there are still steps they can take to minimise disruption, but the longer they leave it, the more difficult this will be. A few urgent actions may be taken today:
Apply for an EORI number for both exports to, and imports from, the UK and EU
Register with Portbase for trade through Dutch ports. Portbase will be made mandatory for trade with the UK post Brexit. In case of an existing registration a re-registration is mandatory
Agree on responsibilities with your customs agent and logistics provider for each part of the customs process including the filing of declarations and update contracts to reflect this
Ensure all employees that are UK nationals are aware of the process for obtaining a residence permit in the Netherlands post Brexit, and are aware of the national transition period until 30 June 2020.
PwC’s team of experts stand ready to help you and your business prepare for Brexit. We can assist you with our Beyond Brexit supply chain assessment, with tax, VAT and customs formalities, people and employment aspects as well as legal and strategic advice. We are your one stop Brexit shop!
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