Next January will see a huge sea-change for which firms in Britain and Ireland must navigate, writes JJ O'Donoghue.
"Essentially, you are going from a perfect free trade scenario to an unknown one, potentially governed by World Trade Organisation rules. That’s what trade rules will default to in the absence of a deal,” says Paddy Stapleton, Tax Partner who oversees the Britain desk in Ireland at RSM.
In simple terms, what that means is from January 1 of next year cargo leaving Rosslare bound for Britain, “will change from being a supply within the single market to being an export to a third country which will drive new complexity and cost for businesses”.
On a practical level Brexit will require companies and businesses on both sides of the Irish Sea to implement a raft of changes governing Vat, dealing with customs and managing supply chains.
RSM, a global accountancy firm with offices in Ireland and the UK, is guiding businesses on both sides of the Irish Sea to navigate the complex terrain ahead of the withdrawal.
“The change in environment from January 1 will require Irish businesses to potentially register for the Vat in Britain, whereas they would have not had that requirement before. Businesses may also need new corporate entities or Branch structures” Stapleton said, outlining one significant change in doing business with Britain.
Stapleton says that while a lot of large businesses have developed a “Brexit plan” over the past 12-18 months, “it’s been difficult for SMEs and mid-market companies to spend limited resources on a Brexit outcome which nobody knows for certain.”
According to Stapleton, there is “still a large wave of businesses that have yet to substantially prepare for Brexit”.
During an informal poll in one of RSM’s recent Brexit-ready webinars a significant proportion of businesses were either at review stage or hadn’t done anything, Stapleton said.
He also pointed out that there was considerable concern from the Revenue Commissioners that Irish businesses haven’t done enough to prepare for Brexit.
The global health pandemic brought on by Covid-19 hasn’t helped either as it disrupted business plans and redirected resources from the looming deadline.
“Practically, what we are trying to do with businesses is help them through the Brexit process,” Stapleton said.
That process starts with an analysis of their supply chain.
“If a company is doing business with Britain, or equally for British businesses selling to the Irish market, we will help review their supply chain and terms of business and tell them in so far as possible what practical changes they need to make. This may also mean engaging with their customers to work through these changes”
Brexit is also impacting British businesses doing business in Ireland.
“For the first time they may need an Irish Vat registration. This will be driven by the terms of business and negotiating with customers on who will be responsible for importation. So, it’s driving a lot of new compliance and reporting requirements that they didn’t previously need,” Stapleton said.
Across the Irish Sea, businesses in Britain that deal with Ireland are ramping up preparedness says Patrick Norris, who heads up the Irish desk at RSM in Britain from his base in Glasgow.
“Interest from British businesses incorporating in Ireland has really ramped up. We are routinely getting several enquiries a day now and people are unsure as to why they need one, but are hedging their bets against the worst case scenario” says Norris.
“With nine weeks until the end of the transition period, business leaders in both Ireland and Britain are understandably asking for more clarity over what is needed to be done in order to adequately prepare,” Norris added.
With the Brexit clock ticking, businesses are spread across the board in terms of how prepared they are for January 1. RSM is taking a holistic approach to all aspects of Brexit, and can step into guide businesses whether they are just starting their Brexit planning, or are well advanced on the road to what will be a whole new landscape.
*As seen in Business Post, November 2020.