The impact of Brexit on small businesses

The deal may have been done but Brexit is still impacting businesses up and down the country. And it’s likely to for many months and years to come.

Just a quarter of people, asked in a YouGov poll at the start of April, thought Brexit was still important. But for small businesses the effects are ongoing as they get to grips with new trade rules.

From exporting goods to Europe and paying import tariffs, to selling online and filing European VAT returns, there are many ways that leaving the EU has changed the landscape for UK firms.

Continue reading to learn about: 

  • Brexit in a nutshell
  • How small businesses will be affected by Brexit
  • What Brexit means if you have customers in the EU
  • Brexit and employing staff
  • Brexit and the future of your business 

Brexit in a nutshell

In a nutshell, the British people voted to leave the European Union in June 2016. We formally left in January 2020 with a transition period ending on December 31 last year.

After more than 40 years enjoying free movement of goods and people with other EU member states, the UK now has customs borders, visas and export/import duties back in place. How this will work in practice has been laid out in the Trade and Cooperation Agreement, more commonly referred to as the Trade Deal, which details everything from fishing rights and territories, to the labelling of goods and provision of financial services.

Although the deal is ultimately done there are plenty of issues still to be ironed out in the coming years. These include the service sector, data sharing and security. 

How does Brexit affect my business?

There are a number of ways that Brexit is affecting UK businesses, including (but not limited to): 

  • The import and export of goods to Northern Ireland (which has its own set of rules)
  • Copyright and trademarks
  • The regulation of the flow of information/data between the EU and UK and how it is regulated by GDPR
  • Product are a number of ways that Brexit is affecting UK businesses, including (but not limited to):
  • The import and export of goods to and from the EU, how tariffs are calculated, customs and excise duties for goods outside of the free trade agreement, and VAT payments and refunds
  • The safety standards
  • Transport of goods and logistics
  • Mutual recognition of qualifications. For example, driving licences, financial advisor licensing etc.
  • Conditions for EU nationals to work in the UK post-Brexit and vice versa

Brexit rules in practice

Imports/exports

Imports/exports

If you run a successful small business in the UK, you don’t export anything and your customers are based in the UK, then the chances are that Brexit won’t trouble you much for now. However, there might be raw materials you buy which will cost more because your suppliers import them, have had to impose tariffs and pass the cost onto you. And if you import anything directly from the EU to use in your business, you may now have to pay import duty.


 If your goods are ordinarily subject to VAT in the UK you’ll be charged import VAT at the same rate. They may also be subject to customs duty, and you’ll have to keep sufficient customs records. In addition to that, if importing from the EU is an important part of your business you’ll need to apply to the Government for an Economic Operator Registration and Identification number.

If you have customers in the EU


As an example, if you run an online shop selling goods and some of your market is based in Europe, the rules have changed. Whereas you could previously ship the goods without making customs declarations, now you may have to fill out a form for each delivery. If you’re VAT registered, export of goods to the EU are now zero-rated for UK VAT purposes. However, you may need to register for EU VAT and appoint fiscal representatives in the countries you export to. If you sell digital services, you will be liable for VAT in EU countries as well.

Thankfully the UK and EU did agree to preferential tariff rates which means goods that moved freely prior to Brexit will still be able to do so with 0% tariff and no quotas. Where this becomes a problem is when proving the origin of your goods.

Product safety
The UK is no longer following the EU safety regime. Importers of goods are now liable as producers for any injury or damage arising as a result of unsafe products they supply. There is also a new product assessment and new UKCA marking which replaces the EU CE marks.

Transport of goods
You can expect delays to goods being imported and exported as they are now subject to customs checks. You also have to have a statement of origin included with any goods.

Mutual qualification recognition
Anyone coming from the EU with a professional qualification may need to have their qualification recognised in the UK. If they were already working here prior to 1st January they don’t need to do anything but in future it’s best to check the Government guidance.

Data sharing
Under the EU we were subject to GDPR rules on data transfer and the Trade Deal allowed for a transition period for these to continue for six months after 1st January until a final ruling is made. The EU commission has published a draft decision ruling the UK’s data protection to be adequate and final decisions will be published in the next few months. The Information Commissioner’s Office offers more detailed guidance on safeguards you need to put in place

Employment
Again, if you generally employ staff from the UK or you’re a one-man band this won’t affect you all that much. If some of your staff come from the EU, then it could be a potential headache. They’ll need to apply for a visa, and you may need to act as a company sponsor, plus guarantee their pay will be a certain amount. If you need workers from the EU with particular skills that you can’t easily find in the UK, you could be faced with a skills gap in your business that takes longer to fill. Conversely, now every foreign worker is subject to the same rules, you might find it opens up a greater talent pool beyond the EU.

The post-Brexit future

It’s only been a few months since we officially left, and it will take time for the full impact of the new rules to become apparent. On the upside, Britain is fast becoming a country that exports far more than it imports, despite the impact of Covid-19, and British goods are still sought after around the world. This can only be a good thing long term as the UK Government signs more trade deals with non-EU countries and other markets open up.

In future, depending on your business, you might find that while exporting to the EU has become tougher, you’ll develop new markets in Asia or America. At the end of the day, the whole Brexit situation is a complex one and if you’re worried about the effect on your business, it’s always best to check with your accountant or tax adviser and get the expert view.

While getting to grips with Brexit rules may be tricky, there are tools that can make it easier for you to run your business. Countingup is the business current account that automates time consuming bookkeeping admin. Find out more here.