The European Union and the United Kingdom have agreed on the rules after Brexit and transition period as a historical deal between the parties was announced. Despite the agreement containing some 2000 pages of details, many things will change after the United Kingdom is no longer a part of the EU.
In this text we go over some frequently asked questions on a general level. We also provide some tips on what to consider with business activities you may have. In this text, we refer to the United Kingdom with the words “Great Britain” and “the UK”.
If you have any questions, please do not hesitate to contact Azets Legal Services at firstname.lastname@example.org.
So what’s the story so far?
Brexit came into force on 31.1.2020 when the Great Britain left the EU after 47 years of membership. The EU and the UK agreed, however, on a transition period that came into force on 1.2.2020 and lasted all the way to 31.12.2020. During this transition period, the parties acted as if nothing had changed.
On Christmas, the UK and the EU reached an agreement on how their relationship would look like after the transition period. Without an agreement the option would have been totally non-contractual relationship, which would have meant that different customs procedures, taxes and tariffs would have been applied.
Due to this deal, both parties managed to remain some key elements beneficial to the both the UK and the EU. This includes remaining a tariff-free and quota-free movement of goods between the UK and the EU border. The parties also agreed on several significant elements, including social security, rule of law and legal procedures, data protection and fishing rights. Authorities have commonly adapted an extended period of the transition agreement to prevent the no-deal scenario and to allow the national parliaments some time to approve the deal.
Many things will change, however, as the UK is no longer a member of the EU. In this document we will go through some aspects on the transfer of goods, services, taxation, VAT, labour, data protection, company law and finances.
Frequently asked questions and some tips
Goods moving between EU-UK
- The party importing goods to EU will need a EORI-number for customs clearance and procedures
- Transferring goods will be regarded as import and export instead of intra-community sales - are you familiar with the documentation and other customs procedures?
- Supply chains will most likely slow down (and become more expensive) due to increased customs duties and the need for extra documentation.
- If the goods have anything to do with chemicals, construction, foods, safety, health or energy, extra steps should be taken to ensure that all special requirements for bringing goods to the EU are met. As a rule, the permits and licenses by the UK are no longer valid after 1.1.2021.
- Are there more customs procedures to be expected for bringing goods from the EU to the UK? It is advised to check this with your trade partner in the UK.
Taxation and VAT
- Value-added tax (VAT) rules regarding payment and VAT return claims will change after 1.1.2021. This applies to both goods and services with relevant EU-UK connection.
- Excise duty will be paid for relevant goods (tobacco products, alcohol etc.), which are brought into the EU VAT regime from the UK.
- Goods need to be cleared through customs and the importation of goods may be under VAT liability.
- VAT on importation can be credited by making a return claim, as usual. This is sometimes called the “slow reclaim procedure”.
- UK firms and VAT liability will change
- For mandatory VAT registration everything will continue normally
- For voluntary VAT registration, a special tax representative needs to be named for Finland if the company has no fixed establishment in Finland.
- Companies can no longer apply VAT distance selling regulation as distance selling can happen only within the EU Single Market. Sales and purchases will not be intra-community, but export and import after 1.1.2021.
- Northern Ireland has special rules regarding the VAT and customs. If your business includes activities, import or export from Northern Ireland, special rules will apply.
- As a rule, VAT liable for B2B service purchases will be the customer and not the seller, and the customer will be liable for paying the VAT to the authorities. If UK legislation changes and the UK will demand VAT from UK businesses, this will be at a loss for the UK company as EU rules are not going to change.
- The situation is somewhat open but EU-UK agreement did give insight and rules on data transfer between the two regimes
- However, the EU Commission has the unilateral power to state whether the UK has adequate legislation for ensuring data protection. This is needed to avoid having additional contracts to DPA and precautions regarding data protection.
- The UK Government has stated that they do not intend to change the current rules which would mean that de facto the UK applies the same rules as EU countries do.
- The EU Commission has not yet made any decisions on this.
- However, the processing of personal data within Azets will always follow the appropriate legislation, such as GDPR, no matter the nationality of a data subject.
Offering services between EU-UK
- In order to operate within the EU Single Market, companies established in the UK need to prove that they follow the rules and regulations set as a requirement for a third country company to provide services within the EU. UK companies will also need applicable permits for certain services.
- These rules are commonly set in national legislation and usually have to do with services regarding health, construction, finance, energy and so on.
- Companies are advised to check that their trade partners within the UK and other third countries have adequate permits to offer services in the EU.
- New special licenses and qualifications from the UK are not automatically recognized within the UK. This includes doctors, nurses, dentists, vets, pharmacists, engineers and architects. If the qualifications have been recognized before 31.12.2020 they are valid after 1.1.2021.
Finance and banking
- The EU-UK agreement did not specifically include the financial sector, which means that the situation is somewhat open. This means that special finance rules regarding third country companies, such as the UK, will be applied.
- New permits, licenses and certificates from the UK are not valid in the EU unless they are specifically recognized.
- In the future, Brexit may lead to slowness and increase in prices as the UK may not be able to use SEPA as effectively as previously. There is also a risk that the UK due to differentiating legislation in the future, the costs and compliance requirements will rise for companies acting both in the UK and in the EU.
- Credit and finance activities in the UK will no longer be restricted by the EU legislation. As most current legislation originates from the EU, companies' accounts and finance interests in the UK should note this and that possible safety nets will not be applied after 1.1.2021.
Contract law and jurisdiction
- Beginning from 1.1.2021, the EU rules regarding cross-border recognition and execution of judgments and jurisdictions will change. For example, getting distrain and remedies implemented within the EU will change.
- It’s likely that the UK court decisions cannot be implemented and executed in the EU as fast as they do now.
- Contracts including jurisdiction clauses and conflict of law rules should note the said change in cross-border recognition of judgments. Common EU rules for applicable law and jurisdiction are no longer applicable.
- If Brexit will cause added costs to an ongoing contract, can the seller charge these costs from the purchaser according to said contract?
- Companies established in the UK are after 1.1.2021 regarded as third country companies and are not therefore automatically recognized in the EU.
- Company recognition will follow the rules of third country recognition, which is often national legislation. The UK companies’ established EU branches will be regarded as third country companies’ branches.
- The situation of so-called EU companies (societas Europaea) in the UK will change as such companies will no longer be considered an EU company according to the EU legislation. They will be normal UK companies from EU perspective. It is unclear how the UK will treat such companies in the future.
- EU legislation on cross-border mergers and acquisitions are no longer applied to the UK. This has effects on ongoing transactions as well as any planned transactions.
Posted workers and insurance
- Brexit came into force on 1 February 2020. The withdrawal agreement included a transition period until the end of 2020. Great Britain departing from the EU affects how work abroad is insured, for example, the validity of A1 certificates and right of residence.
- According to the withdrawal agreement A1 certificates granted before the end of the transition continue to be valid for the period stated in the A1 certificate, providing the work continues without interruptions.
- Posted workers from Great Britain to Finland
- A1 certificates that have been granted before 31 December 2020 will be in force for as long as the certificate has been granted. Information about the certificate and social security can be asked from the authorities that granted British A1 certificate.
- Posted workers from Finland to Great Britain
A1 certificates that have been granted before 31 December 2020 will be in force for as long as the certificate has been granted. More information can be found in the site of Finnish Center for Pensions. The site also has a good FAQ section: https://www.etk.fi/en/work-and-pensions-abroad/insurance-while-working-abroad/brexit/
Working abroad and right of residence
- Posted workers from Great Britain to Finland
- If a UK citizen wants to continue to reside in Finland she/he must change the EU registration to a right of residence under the withdrawal agreement between 1 October 2020 and 30 September 2021. More information: https://migri.fi/en/brexit/en
- Posted workers from Finland to Great Britain
- EU citizens can apply to the EU Settlement Scheme to continue living in the UK after 30 June 2021. More information: https://www.gov.uk/settled-status-eu-citizens-families/eligibility?step-by-step-nav=0c79b832-75de-4854-8154-d62774a8dfb8