Preparing an online business for Brexit

16/10/2019

The EU is not only Britain’s largest trading partner, but also represents over 50% of the market for online businesses. If you operate on online business, particularly an ecommerce website that sells goods or services to the EU, you may be wondering what Brexit could mean for your business as the political situation unfolds. Whilst it’s important to highlight that there are no clear-cut answers until there is total clarity over the future of the UK’s relationship with the EU, there are already a number of things online business owners can benefit from being aware of. 

The referendum result on June 23, 2016, saw the value of the pound fall sharply, and since then, the UK has experienced a period of prolonged currency volatility from which it has not significantly recovered. The effect of the deprecation of the pound – no doubt in large part to the uncertainty surrounding the final outcome of Brexit – is an example of one of the ways online businesses and retailers may have already been affected by Brexit before a final outcome has been delivered. Typically a weak pound would be expected to boost business for British exporters, however, recently the British Chamber of Commerce have reported weaker than expected export sales, which could be owing to the fluctuation in exchange rates. If you do operate an online business that sells to the EU then there is some hope that a conclusion to Brexit – one way or the other – will at least bring an end to some of the uncertainty and could bring greater stability to the value of the pound.

Have you got your EORI number?

It will come as no surprise to many that a no-deal Brexit would likely be highly disruptive for online retailers since there will be no agreement between the UK and the EU with regard to regulation, security, quality control and customs procedures. The immediate knock-on effect could result in slower trade and higher transport costs for retailers and consumers alike. If your business offers an online returns policy (e.g. for clothing retailers) this could be especially problematic due to the potential delays involved in processing returns that are stuck in transit. One of the ways the government is attempting to mitigate this disruption is by requesting that businesses – whether online or not – who either import from the EU or export to it to apply for an Economic Operators Registration and Identification (EORI) number. In the event of a no-deal Brexit, an EORI number will be required to move goods in or out of the EU and failure to obtain one may result in goods not clearing customs and businesses incurring additional costs and storage fees. You can find out more information on how to obtain an EORI number from the gov.uk website. 

Despite the likely disruption caused by a no-deal Brexit, there may be some relief for businesses in certain sectors in the form of the temporary lowering of tariff barriers. The government have explained that a temporary schedule would increase the number of tariff-free imports from 80% before Brexit, to 87% in the event of a no-deal. This means that for some businesses the cost of importing goods may be significantly lower for a brief window where goods could be stockpiled to make the most of the low rates. Not all sectors will benefit from this however, and if you import from the EU, rather than elsewhere, it may be that the cost of goods goes up instead of down. For more information on temporary tariff rates, go to gov.uk.

Have you reviewed your data flows?

One of the other key issues for online businesses to be aware of is the fact that in the event of a no-deal Brexit, the EU General Data Protection Regulation (GDPR) will no longer be law in the UK, until such time as the British government write it into UK law. In this scenario the UK will be seen as a ‘third country’ by the EU, which may inhibit the flow of data from the EU to the UK, since they will need to ensure that the appropriate safeguards are in place. If your business relies upon data being transferred from the EU to the UK, it’s important to review and understand both where the data is coming from (e.g. consumers, suppliers, other businesses etc.) and what the nature of the data is (e.g. is it personal data, sensitive data etc.). For more information on data compliance in the event of a no-deal Brexit, visit the ico.org.uk.

Have you checked how changes to VAT could affect you?

If you operate an online business selling digital services to customers in the EU, you may wish to review the government’s guidance on VAT after Brexit, or speak with your accountant. Whilst the government have stated they will try to keep VAT procedures as close as possible to the way they work now, there will inevitably be some changes. Similar to the situation with data, in the event of a no-deal Brexit, the EU will view goods being exported to the EU from the UK in the same way as from other non-EU countries and therefore different VAT duties may apply.

In these times of political and economic uncertainty we appreciate it can be especially challenging for business owners. We hope the above information provides a useful prompt to help you feel more prepared regardless of the outcome.