With the United Kingdom no longer bound to EU law, Brexit has impacted both the legal and logistical implications of selling goods and services to the UK.
In this article, we will give you an overview of the biggest changes that may affect your sales team and business regarding Brexit. We’ll also detail how you can continue to do business with those in the UK while remaining compliant.
Table of contents
- Brexit: Overview and background
- Importing from the UK & exporting to the UK
- Taxes and tariffs (VAT)
- Providing services to the UK
- How does Brexit affect GDPR and data protection?
- Industry-specific changes
- Brexit changes still to come
Brexit: Overview and background
Once the EU and UK came to an agreement regarding Brexit, the UK entered a transition period (also referred to as an implementation period), which ended on December 31, 2020. From January 2021 onwards, the economic relationship between the EU and UK changed significantly.
The UK is now considered a country outside the EU, and therefore won’t benefit from the EU’s economic structures such as the single market and the customs union.
As part of the British exit from the EU, there are significant changes in regards to the EU-UK Trade and Cooperation Agreement. This document covers several key economic areas such as trade in goods and in services, digital trade, intellectual property, public procurement, aviation and road transport, energy and more.
We’re going to walk you through the key things to know as the UK enters this new economic era. But given these changes, it’s worth conducting your own follow-up research to ensure you remain in good business standing given the new rules and regulations.
How EU businesses can continue importing from the UK & exporting to the UK
The UK no longer retains the customs privileges it had as an EU member state and is now treated like any other non-EU country. The UK’s withdrawal from the EU may affect your company if:
- You sell goods or services to the UK
- You buy goods or receive services from the UK
- You move goods through the UK
- You use UK materials and/or goods to trade with EU partner countries
How has Brexit affected EU to UK imports and exports
To continue importing or exporting goods to, from, or through the UK (excluding Northern Ireland), you’ll need to file customs declarations.
If your EU business has not completed the correct customs processes, your goods will not be able to cross the EU border.
Make sure to coordinate with your UK trading partners to:
- Agree on roles and responsibilities
- Prepare the correct paperwork for the goods you plan to trade
- Acquire special licenses to import or export certain goods such as waste, hazardous materials, chemicals, etc.
EU businesses that buy goods from the UK and place them on the EU market are now considered importers, while EU businesses that distribute products to the United Kingdom are now considered exporters.
The EU and UK Trade and Cooperation Agreement establishes that when goods meet the relevant rules of origin, there will be zero tariffs or quotas on trade between the UK and the EU.
As a note, the movement of goods between Northern Ireland and member states of the EU, including Ireland, will not experience significant changes.
- To continue importing or exporting goods to, from or through the UK (excluding Northern Ireland), you’ll need to file customs declarations
- You may also need to acquire special licenses to import or export certain goods
- Make sure to lock down with your customer who will be in charge of what in order to avoid any confusion or grievances
Taxes and tariffs (VAT)
The UK is no longer part of the single EU VAT area, which means the sales tax is now determined and collected by each individual country. This means that goods that are imported by the EU from GB are subject to VAT in that country.
VAT changes for B2C brands
Here is a brief outline of VAT changes for B2C (business to consumer) companies selling from the EU to the UK:
- For packages that are valued at £135 or less and are sold via the seller’s website, import VAT will not be charged, but the EU seller will still need to account for UK VAT when it sells the goods.
- For packages that are valued at £135 or less and are sold via an online marketplace, import VAT will not be charged, but the EU seller will still need to account for VAT on the sale. The Office of Management and Policy (OMP) should account for, declare and pay the tax to the tax authority. It’s not necessary for the EU seller to account for UK VAT nor be VAT registered there.
- For packages that are valued at £135 or more and are sold via the seller or online marketplace, VAT will be charged at the border. If the customer is considered the importer, they will need to pay the VAT. However, if the EU seller is the importer of record, they will need to pay the import VAT and will also need to register and account for UK VAT on the sale to the consumer.
Until June 30th, 2021, goods that are valued at less than €22 may be exempt from VAT when entering the EU under certain conditions. From July 1st, 2021, VAT will be due on all imports, regardless of their value.
General VAT changes
If you’re an EU company that wants to export goods to the UK, the goods you export are generally exempt from VAT in the EU. However, you need to be able to prove that the goods left the EU, usually by showing the exit certification given to the exporter by the customs export office.
Excise duties (for goods such as alcohol, tobacco or fuel) are due upon the importation of goods brought into the VAT territory of the EU from the UK. The duties are set by the country where the goods are imported or where the goods will eventually be consumed.
For B2C brands:
- Import VAT will not be charged on packages that are valued at £135 or less and are sold via the seller’s website
- Import VAT will not be charged on packages that are valued at £135 or less and are sold via an online marketplace
- Import VAT will be charged at the border for Packages that are valued at £135 or more and are sold via the seller or online marketplace
If you’re an EU company that wants to export goods to the UK, the goods you export are generally exempt from VAT in the EU, but you do need an exit certification to prove the goods left the EU.
Excise duties for certain goods are due upon the importation of goods brought into the VAT territory of the EU from the UK.
Providing services to the UK
Your EU business that provides services to the UK may be affected if:
- You have subsidiaries or business branches in the UK
- You plan to merge with a UK company
- You or your employees travel between the EU and UK for business
- Your business operates in the service sector in the UK
- You or your employees work within a UK-regulated profession
How to demonstrate compliance
EU service providers and established professionals who operate in the United Kingdom will need to demonstrate compliance with UK rules. This is particularly important for regulated professions or those who need certifications to run their business.
For example, if you’re an EU citizen with professional qualifications acquired in the United Kingdom, you’ll need to have your qualifications formally recognized in the relevant country in accordance with their rules. If you have UK staff who operate in the EU, they’ll also need to have their qualifications formally recognized based on the rules of the country in which they operate.
How is business-related travel affected?
It’s also worth considering rules around business-related travel. For visits under six months, EU and Swiss citizens can typically enter the UK without applying for a visa and can participate in business-related activities, such as meetings or conferences. For longer-term visits, you’ll need to refer to UK immigration laws.
- EU service providers and established professionals who operate in the UK will need to demonstrate compliance with UK rules
- You may also need to have your qualifications formally recognized in the relevant country in accordance with its rules
- Business-related travel may be affected, but primarily for longer-term visits (e.g. longer than 6 months)
How does Brexit affect GDPR and data protection?
Because the GDPR has been incorporated into UK data protection law as the UK GDPR, there has been little change to the core data protection principles, rights and obligations found in the UK GDPR compared to the EU GDPR. However, the UK GDPR may change or evolve in the future.
Data protection and personal data
As of January 1, 2021, the transmission of personal data from the EU to the UK is subject to the rules for data transfers to non-EU members, as set out in the EU General Data Protection Regulation (GDPR).
The EU-UK Trade and Cooperation Agreement temporarily allowed the continued flow of personal data from the EU to the UK, with the stipulation that the UK had to be found up to par with the EU GDPR standards.
Thankfully, the EU recently decided that the UK was found adequate or “essentially equivalent level of protection” to the EU GDPR, and so the flow of personal data between the EU and UK will continue. This decision is valid for four years, after which it would be possible to reevaluate the adequacy finding.
If in the future the UK is not found adequate or essentially equivalent, the UK will be subject to additional rules and regulations to continue the free flow of personal data.
Monitoring data protection and personal data regulations will be particularly important for EU businesses that plan to continue to work with data centers located in the UK.
Intellectual property and trademarks
As of January 1, 2021, existing EU intellectual property rights such as EU trademarks, community designs, community plant variety rights and geographical indications will remain protected under the Withdrawal Agreement. However, any new EU unitary rights will have a reduced territorial scope as they will no longer have effect in the United Kingdom.
If you have an EU trademark, you can apply to the Intellectual Property Office to register a UK trademark. You can also visit the EU Intellectual Property Office (EUIPO) to register an EU trademark (EUTM).
Copyright and unregistered designs
For any copyright and unregistered designs, EU cross-border copyright changes may affect your business. Your designs may not be protected if you do not follow the protocols for disclosing your designs.
Read the official guidance for more information on the new rules for unregistered design protection in the UK and EU.
- Because the GDPR has been incorporated into UK data protection law as the UK GDPR, there has been little change
- The decision that the UK GDPR is adequate in relation to EU GDPR is valid for four years, after which it would be possible to reevaluate the adequacy finding
- EU intellectual property rights such as EU trademarks, community designs, community plant variety rights and geographical indications will remain protected under the Withdrawal Agreement
- If you have an EU trademark, you can apply to the Intellectual Property Office to register a UK trademark
- EU cross-border copyright changes may affect your business and your designs may not be protected, so make sure to learn more about the rules for unregistered design protection in the UK and EU
With each industry having its own unique quirks and circumstances, it’s worth diving into how rules and regulations might be implemented within each industry.
Retail and e-commerce
If you are an EU business selling goods online to UK consumers, the VAT will be due in the UK, in line with the UK VAT rules and rates. To sell in the EU, UK businesses will now need to adhere to each individual country’s rules.
Retailers and e-commerce businesses will face challenges from several directions. For their supply chain, they should map out the physical flow of goods, coordinate with suppliers and customers on Brexit readiness and implications, and prepare for any potential pressure points on their logistics.
As an EU consumer, the same charges that apply to goods bought online from non-EU retailers will now apply to online shopping from the UK. Since January 1, 2021, goods bought online for personal use from a business in the UK are subject to customs formalities in the EU, including the relevant VAT and duties where applicable.
To avoid surprise fees when shopping online from the UK, carefully read the sales terms and conditions and the delivery information before placing your order. All websites that sell goods into the EU are obligated to inform consumers about the total price of goods and services, including taxes and any other charges.
As mentioned earlier, you’ll also need to consider the new rules and regulations around imports, exports and VAT.
Within the financial sector, the UK previously benefited from a rule called ‘passporting’.
The EU passporting system for banks and financial services allowed firms that are authorized in an EU country to trade freely in any other EU country with minimal additional authorization. These passports are foundational to what makes the EU single market for financial services possible.
Because the UK is no longer a member of the EU, UK banks and financial services lose their passport rights. Without passport rights, UK firms must apply for a license for each EU country and may endure burdens such as:
- Duplication of effort and substantial additional costs
- Licenses are not available in many EU countries
- The range of licensed banking services is limited
- The license is usually only valid for one country at a time (no cross border rights)
Although London won’t become completely irrelevant in the financial sector, European financial centers like Paris, Frankfurt and others may be able to leverage Brexit for their advantage.
Overall, the Brexit change will likely lead to a more decentralized global financial market and make room for multiple smaller cities to play a bigger role in the sector.
Tech and innovation
The technology and innovation sector was not given separate consideration (except in regard to telecoms) in the EU-UK Trade and Cooperation Agreement. In many ways, it will continue to be “business as usual” for tech and innovation regulations. However, implications from other Brexit changes may impact this sector.
For example, tech and innovation firms may find it harder to retain and attract talent due to new immigration rules. According to a study done by TopCV, 18% of respondents in the technology sector said they plan to leave their current job with the goal of advancing their careers due to Brexit.
Tech and innovation firms should begin to strategize on how to incentivize their employees to remain in the UK so the skills gap doesn’t further widen.
Overall, real estate transactions are governed by the law of domestic jurisdictions without significant intervention at the EU level. As a result, legal formalities and requirements such as land ownership, the conveyancing process, land registration, leases, tenancies and taking security over land and property taxes will be largely unchanged by Brexit.
Before Brexit, the UK followed EU real estate requirements on activities such as planning, public procurement, employment and environmental regulation. Any impact of Brexit on these areas could have repercussions for EU-UK real estate transactions.
As for real estate development, leaving the EU could give the UK more flexibility to shape its domestic legislation around environmental assessments such as environmental impact assessments, strategic environmental assessments and others.
However, it’s not expected that the UK will make substantial changes to these environmental assessments since they still need to comply with their international treaty obligations.
- Retail and e-commerce. If you are an EU business selling goods online to UK consumers, the VAT will be due in the UK, in line with the UK VAT rules and rates. To sell in the EU, UK businesses will now need to adhere to each individual country’s rules.
- Finance. Because the UK is no longer a member of the EU, UK banks and financial services lose their passport rights. Without passport rights, UK firms must apply for a license for each EU country and may endure burdens.
- Tech and innovation. In many ways, it will continue to be “business as usual” but it may be harder to retain and attract talent due to new immigration rules.
- Real estate. Legal formalities and requirements such as land ownership, the conveyancing process, land registration, leases, tenancies and taking security over land and property taxes will be largely unchanged by Brexit.
Brexit changes still to come
Although many rules and regulations kicked in on January 1, 2021, many others are undergoing additional evaluation or starting with ‘soft’ implementation. The data sharing and financial services sectors are also still finalizing decisions.
Although the UK and EU have agreed to some corresponding rules for now, they don't have to remain identical in the future. If one side takes exception to the changes, it could trigger a dispute, sparking the need for more negotiations or lead to tariffs (charges on imports) being imposed on certain goods and services in the future.
Given how intricately connected the UK and EU were for the past several decades, it will take immense effort for them to separate and go in this new direction. As a result, we’ll be navigating the impact of Brexit changes in the months and years to come.
Overall, we recommend that you continue to monitor overall Brexit changes as well as closely track changes for your specific industry in the coming months and years.