Brexit, Borders and Online Businesses

Posted on 29th May 2019 by Samantha in Ecommerce, Website
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Brexit was among the top trending searches of 2016. Brexit refers to the United Kingdom’s (UK) choice to no longer be a part of the European Union (EU). The EU includes 28-member countries and facilitates a single market for the free movement of goods and citizens.

It is year three since UK’s decision to leave the EU and the government is still working out the kinks to best facilitate a smooth transition. The initial transitional period for Brexit was set to March 29, 2019 to December 31, 2020. If you’ve managed to keep up with things you’ll notice that they recently agreed to a “FLextension” of the famous Article 50 until October 31, 2019.

However, since the initial vote up to now, there are still a number of concerns and uncertainties looming overhead. Brexit can take one of two main formats – ‘Soft’ and ‘Hard’ Brexit.

 What is Soft Brexit?

A soft Brexit means that Britain would still have access to the single market while being able to make deals without the rest of the EU. They would also remain a part of the customs union.  Members of the customs union do not pay tariffs (or import taxes) on goods traded between two countries or trade blocs.

However, should the UK go with this deal they would not be able to make their own deals with other countries.

What is hard Brexit?

A hard Brexit deal means the UK will leave the EU without a deal, cutting off the benefits of being in the EU single market and its customs union. Britain would no longer need to abide by EU regulations and tariffs.

With Hard Brexit, online businesses may have to change their IT-infrastructure, shipping strategy and regulations. However, this deal allows the UK to make decisions relating to the economy, border control and trading deals.

Possible impact of Brexit

No one knows for sure what the exact outcomes of Brexit will be but there is no denying that a number of changes are to be expected. However, once Brexit comes into effect and depending on the agreement, fees and taxes in the marketplace will be impacted.

The return of customs barriers

Being a part of the single market agreement under EU, Britain does not have to pay customs fees for goods shipped between member countries and vice versa.  However, after leaving, these fees will return not just for them but EU countries wishing to trade with them.

Without a Brexit deal, UK will be regarded as a third country. EU countries who export goods to the UK will then be required to conform to possibly new export standards and customs duties.

This could result in fewer exports and imports, higher costs to trade and a possible decline in direct investment. Without question, this will have an impact on the economy. Online businesses will also be affected. There will be tariff and additional regulations for eCommerce sellers who import goods from the EU, or sell to customers within the EU.

The Return of Value Added Tax (VAT)

Should Brexit happen without a deal there could be a return of Value Added Tax (VAT).  This will affect both countries in the EU and overseas doing imports into the UK as this will attract VAT.  With the implementation of Making Tax Digital (MTD), businesses will also have to purchase or update their software to do their VAT return. However, VAT within the UK is expected to stay the same.

Changes in Distance Selling Regulations (DSRs)

We live in an era where persons rarely go into a physical store anymore.  Whether they are buying furniture, gadgets or clothing online is usually the route. In the last few years, E-commerce websites have skyrocketed. It is the fastest growing retail venture globally.

If you operate an online store and with a global target audience, especially in Europe you would already be accustomed to Distance Selling Regulations (DSRs).

DSRs are the guidelines in place for the purchasing of goods and/or services online without face-to-face contact.

The EU VAT distance selling rules apply to online sales to private customers in other EU member states.

If Brexit happens without a deal, the EU’s DSRs will no longer apply to the UK.  Simply put, goods entering the UK will no longer be free. Remaining countries in the EU that do business that facilitate distance selling into the UK may have to pay customs duty and VAT at the border.

Postal and low-value goods

Normally parcels costing less than £15 sent between the UK and the EU do not attract VAT. During post-Brexit, this may not be the case. Every UK parcel except children clothing will be subject to VAT.

Changes in Courier Charges

EU countries do not experience restrictions on shipment of goods and packages all over Europe. After Brexit, Britain will no longer have access to this benefit.

It is highly possible all package entering the UK will have to go through customs in the receiving country.

Items that go through custom will require additional paperwork and a fee along with potential shipping delays.

There is still a lot of uncertainties, as no one can be certain of the exact changes to expect. However, changes in custom, trade and taxes will influence shipping costs and importing and exporting duties.

Conclusion

In summary, there will be several post-Brexit changes which will affect businesses that operate online and offline, within the UK and overseas. However, until the government makes the final decision, nothing is certain.

We can anticipate possible changes, some that may even drastically change the face of how you do business. However, if there is one thing humans are good at and it’s adapting. So, these changes over a couple of months and years will become part of your routine business operations.

In preparing for Brexit, businesses should keep up-to-date with developments while looking at all the possible outcomes that will have an impact.

After doing that, you will have to wait like the rest of the world to hear the final Brexit decision- deal or no deal. During this period, start working on plans to ensure your readiness for every eventuality.