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Budget announcements

This year again, as expected, Brexit was a central part of the Budget with significant amounts (€350 million) allocated to various departments across Government, write Brian Daly and Glenn Reynolds of our Brexit Response Team.

This includes €100 million allocated across the Revenue Commissioners, the Department of Enterprise, Trade and Employment and the Department of Agriculture and €200 million for staffing and infrastructure needs in 2021 – “Deal or no Deal”.

The Budget was prepared on the basis of a No Deal i.e. no Free Trade Agreement (FTA) being reached between the UK and the EU. In that context it has allocated €650 million in contingency funding to support affected sectors with €220 million being released immediately.  This comes from a €3.4 billion COVID-19 and Brexit Recovery Fund. 

The minister also announced in his speech that Ireland will seek to avail of the EU’s Brexit Adjustment Reserve in the coming years. The details of this fund have yet to be finalised.

It is welcomed that the Government continues to support businesses in preparing for Brexit notwithstanding the other obvious challenges of our time.

Upcoming Brexit Omnibus Bill

In addition to the measures announced, it is important to note that the Government will shortly bring forward a Bill (more commonly referred to as the Brexit Omnibus Bill) which seeks to preserve continuing access to certain priority services, benefits and reliefs relating to the UK that might otherwise be denied when the Transition Period ends on 31 December 2020. It is understood that it will apply regardless of whether there is an FTA.

The understood purpose of the Bill will be to prevent a cliff edge for Irish businesses and citizens on 1 January 2021 and to satisfy a number of obligations and commitments that Ireland has made to the UK outside of EU membership, e.g. under the Common Travel Area.

It is understood that the Bill will repeal and replace the Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Act 2019. Many of the provisions in this Act, which were subject to Ministerial Commencement Order, cannot be commenced as they were enacted on the basis of no agreement on the terms of the UK’s withdrawal from the EU.

It will be important to understand the impact of the measures which are included in the new Brexit Omnibus Bill, in addition to any measures which are not included.  

Actions to take

Regardless of whether there is an FTA, important changes will apply for business from 1 January 2021.  In the context of VAT & Customs, there will be new systems, processes and paperwork requirements. In addition, depending on the outcome of the trade negotiations, there may also be tariffs.

Our advice continues to be that businesses should be prepared in advance for these changes.

We have set out below key actions that businesses should take now in preparation for 31 December 2020 regardless of whether there is an FTA.

VAT & Customs

  1. Understand the potential impact on your supply chain
    Ensure you have reviewed your supply chain to understand the potential impact of a customs and VAT frontier on the movement of your goods to and from Great Britain. Ensure hauliers and freight forwarders are prepared with the relevant permits and registrations.
  2. Customs Classification and Origin
    Ensure you have confirmed the commodity codes for all goods moving into and out of Great Britain and you understand the potential tariff and non-tariff implications associated with the movement of your goods. Understand the origin of your goods and whether you can access preferential tariffs.
  3.  Contracts
    Assess whether the terms of your contracts (especially incoterms) with your suppliers and customers meet your needs post Brexit, in particular who is responsible for import clearance and any duties arising. Incoterms are internationally recognised trade terms that define each party’s obligations, costs and risks associated with the delivery of goods from seller to buyer.
  4. Obtain an EORI number
    To operate within a customs regime, importers and exporters of goods need to be customs registered. If not already registered, an application should be filed with Revenue via Revenue’s Online Service (ROS) for an EORI (Customs) number if you are importing goods into or exporting goods from Ireland.
  5. Filing Customs declarations
    Customs declarations will be required whether or not an FTA is agreed. Consider how you will file Customs declarations: for instance, you may wish to appoint a Customs agent or your freight company to file these on your behalf. Depending on your profile, you may prefer to bring the declaration process “in-house”, and in which case you will need to consider the associated systems and personnel requirements. Make sure you understand the information needed to file Customs declarations and where you will get it. 
  6. Export/import controls
    Understand whether any additional controls will apply to your goods such as licensing requirements, Sanitary and Phytosanitary (SPS) controls or advance notification requirement (e.g. for agri-products).
  7. VAT
    Determine if any additional VAT considerations will arise from your movement of goods post Brexit, e.g. additional VAT registration requirements. New VAT measures to be introduced in the upcoming Brexit Omnibus Bill (discussed above) should relieve the VAT funding cost of imports for VAT registered businesses in Ireland. Familiarise yourself with how these rules will operate.
  8. Impact on ERP/finance system
    Assess what changes may be required to your ERP (Enterprise Resource Planning) or finance systems in anticipation of a changed VAT and Customs Duty accounting regime post-Brexit.
  9. Deferment account/Customs guarantee
    If you want to be in a position to defer the payment of Customs duty to the 15th day of the month following the month of import of the goods, ensure you have access to a Customs deferment account either directly or through an agent. If directly, the lead in time to obtain such approval can be at least two months and a guarantee is needed.
  10. Landbridge
    If using the UK Landbridge, understand how transit simplification applies and the procedure to follow in each country (i.e. Ireland, UK and France) to apply the relief.
  11. Use of Other Customs reliefs/simplifications
    Make sure you are aware of the reliefs and simplifications available such as customs warehousing and inward processing relief, which could mitigate the impact of Brexit on your business in Ireland or the UK. A guarantee is often required to avail of some reliefs so apply early.
  12. UK temporary measures
    Consider if any of the temporary Customs relieving measures the UK Government have announced in respect of imports into the UK could assist your business. These measures are designed to reduce the potential for Customs duty and delays at import to arise. 

Other areas

  1. Cash flows
    Review cash flows, working capital and foreign exchange exposures and consider what actions may be required.
  2. People
    Communicate with staff who could be affected by changes in their rights to reside and work and consider what actions need to be taken to ensure such rights will continue post Brexit.
  3. Tax impact of intragroup payments
    For companies operating through group structures that include UK tax resident companies, consider the tax treatment of dividends, interest and other payments to / from EU Member States post Brexit and whether making such prior to the expected Brexit deadline / restructuring group operations may be beneficial from a tax perspective.
  4. Data flows
  5. Review data flows and consider if restrictions will apply to the movement of personal data from the EU to the UK and whether any derogations can be obtained, or arrangements put in place to facilitate the ongoing transmission of such data.
  6. Services
    Understand the impact of Brexit on the movement of services between Ireland and the UK. For many regulated businesses, preparation will already be at an advanced stage. But consideration should be given to the impact of Brexit on the movement of non-regulated services. For example, where the provision of services requires the movement of data, recognition of professional qualifications, etc. these requirements may act as a barrier to the provision of such services.

More on Budget 2021