How Brexit Will Impact Your Accounting

It is certainly set in stone that the UK will be leaving the EU, as it stands we are set to formally leave on 31st January 2020 when we will enter a transition period until 31 December 2020.

During this period, the UK’s trading relationship with the EU will remain the same while the two sides negotiate a free trade deal. At the same time, many other aspects of the UK’s future relationship with the EU – including law enforcement, data sharing and security – will need to be agreed.

If a trade deal is ready in time, the UK’s new relationship with the EU can begin immediately after the transition. If not, the UK faces the prospect of having to trade with no agreement in force. This would mean checks and tariffs on UK goods travelling to the EU.

Across the last few years, many people have voiced concerns over the uncertainty that Brexit will bring, however, we’ve rounded up all of the key information you need to know regarding accounting and how Brexit will impact you and your business.

Our handy guide will make sure you go into the new decade feeling confident about the changes your business might face.

Preparing your annual accounts

When you’re organising your accounts, be aware that all companies will need to use ‘UK adopted IAS’ instead of EU adopted IAS for financial years that begin after the UK leaves the EU.

On the day that the UK leaves the European Union, both of these standards will be same, so don’t worry too much. However, later down the line there may be some differences if the UK adopts or amends standards and the EU doesn’t.

Data Protection

The majority of data protection rules that impact small and medium-sized businesses and organisations will stay the same after Britain leaves the EU. Luckily, there will actually be very few changes required in preparation for data protection compliance post-Brexit.

VAT

Now this is the big one.

Firstly, when Britain leaves the EU, businesses will have to apply VAT to trading with EU countries in the same way as when trading with non-EU countries now. Ultimately the UK will set its own VAT rates, however, to ensure a simple and smooth transition, the short-term plan is to stay as close to our current position as possible.

Secondly, we’ll be seeing the end of triangulation. Currently, triangulation lets British businesses order goods from one EU country and have them delivered straight to another EU country without the need to register for VAT in either of them. When Britain leaves, this won’t be available anymore and businesses will need to register in either of the two countries.

As well as that, businesses currently registered for VAT in other EU countries need to be aware that some countries have different registration requirements for EU and non-EU businesses, so your circumstances might change.

Current EU rules also mean that UK businesses will still be required to register for VAT in EU member states where sales are made in order to account for the VAT due in those countries.

Self-Employed UK workers abroad

In terms of travelling, passports for those of you working abroad must have at least six months left and be less than ten years old for valid travel to EU countries. There’s also been a lot of rumour online in regard to Visas. Providing your stay will be less than 90 days, no visas will be required at all.

However, you will also need to make sure that your travel insurance and healthcare will cover trips. Access to state health care through the European Health Insurance Card (EHIC) might no longer be available after Britain’s exit.

And finally, if you’re a self-employed worker operating within the EU, EEA or Switzerland, it’s also important to check whether you will need to pay local social security contributions after we leave the EU, as it’s all still subject to change.

That just about sums up the most important factors that will affect accounting after leaving the EU. Many of the changes aren’t as big as predicted, so there’s no need to worry about how your business will adapt. Having an idea in advance of the measures you may need to introduce once we leave the EU will certainly help your business’ transition to a post-EU UK be a lot smoother.

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