Brexit Countdown: 5 Months Left, But What Do We Know?

The end of the transition period is looming

For UK businesses, there’s still a lack of clarity around how they’ll operate after Brexit. With the transition period due to end on the 31^st December, there’s only five months left before the big day.

 Now is a good time for businesses to take stock - what do we know about life in 2021, and what is still unclear?

The difficulty for businesses

The problem for many organisations now is that since the UK formally left the European Union on the 31^st January there's been continued uncertainty. Trade deals, laws and the relationship between the UK and EU going forward are all cause for concern, and unfortunately this uncertainty looks set to continue.

Will I still be able to employ nationals?

Although some reassurance has been offered verbally by the Prime Minister, the details around how EU citizens will be employed after this year is sketchy. It’s down to employers to keep up to date with developments in the media and on the Gov.uk website.

However, the government has stipulated that employers must check a job applicant’s right to work in the same way as now until the 30th June 2021. EU nationals will also need to have applied to the Settlement Scheme if they wish to be a UK resident permanently. After this year there will no longer be freedom of movement for people.

What’s going on with trade deals?

Trade deal negotiations have been going on for several months. The government wants the UK to have maximum access to EU goods and services whilst leaving the customs union and the single market. It also wants the jurisdiction of the European Court of Justice to end.

However, negotiations haven’t yet been successful and there is much disagreement between the EU leaders and UK Brexit negotiators. It’s also unclear exactly which EU employment laws - for example workers' rights and environmental protection - will continue after the transition period ends.

Again, it’s a case of wait and see.

What if no trade deal agreements can be reached?

Earlier in the year an extension to the transition deadline was possible, and amidst COVID-19 chaos there was some appetite for this. However, the government is keen to press on and the deadline to request an extension has now passed.

If a trade deal has not been put in place by the 31^st December, then the UK will very likely pay tariffs on its EU exports. The problem is that the UK appears - to the EU at least - to want its cake and eat it. In other words, to enjoy the freedom of breaking away from EU rules but still enjoy zero (or very low) trade tariffs, as well as to trade with countries further afield. Therefore there’s now a stalemate which is making negotiations more difficult.

On top of this, the UK needs to work out how it’s going to work with the EU in terms of law enforcement. When it leaves the EU, it will no longer avail of the European Arrest Warrant scheme so a replacement will need to be found.

Can my business set up in a freeport?

Potentially yes, although the exact details of freeports are yet to be ironed out.

Freeports are areas where goods that are imported can be processed, or held, without the need to pay customs duties before re-exportation. They can also be used for importing raw materials and making finished goods ready to export.

The UK government is planning for up to 10 post-Brexit freeports by the end of 2020 ready to start operating in 2021. However, some trade experts say that freeports are of limited use, and simply serve to redistribute economic activity from other parts of the country. This means that the process companies will need to use in relocating to a freeport is currently still unclear.

Will I have to put my plans for growth and innovation on hold?

This one depends on your specific business and what effect Brexit has on it going forward. However, don’t forget that there’s a range of supports on offer from the government to actively encourage business innovation and expansion. These include R&D Tax Credits, which allow you to reclaim a sizeable proportion of your research and development costs, and R&D Grants.

R&D Tax Credits are particularly lucrative, with up to £33 per £100 of R&D costs claimable. The relief is provided either as a reduction in a company’s Corporation Tax liability, or as a cash lump sum for those that made a loss.

Any UK company of any size and in any sector can claim, as long as a project was carried out that addressed a particular scientific or technological uncertainty. This could be designing a brand new product for example, or appreciably upgrading an existing one.

To find out more about what’s on offer, costs that can be covered and how to claim, we recommend reading our R&D Tax Credits, Capital Allowances and R&D Grants pages.

Other issues to consider

There are many other issues that could well directly affect businesses, particularly if the UK leaves with no deal. It will therefore be essential that businesses are aware of these possibilities and take steps to less their impacts. For example:

Blockages at EU ports

These will likely affect the flow of goods into and out of the UK. Delays as long as two-and-a-half days have been touted for goods being exported.

Disruption to cross-border financial services

How data flows between the EU and the UK - and how it’s protected - is also still unclear. It’s been said that currently GDPR for example will still apply, but whether that remains the case over time is yet to be seen.

Travel

UK nationals who travel abroad for work could lose their rights and healthcare coverage, depending on the country they’re visiting. For holiday travellers too, the EHIC card is also likely to be invalid.

Contact the R&D funding experts at Myriad Associates

The Brexit situation is clearly very fluid but a lot can change in five months. It’s going to be a case of keeping an eye out for government updates, and putting plans in place to minimise the impacts on your business. However, as specialists in R&D tax reliefs and funding, we can help you achieve the finance required to reinvest in your business during these uncertain times.

Why not contact us today on 0207 118 6045 or you drop us a message to discuss your options.