How will Brexit affect businesses in Ireland? Research from YouGov on behalf of Sage indicates 87% of Irish businesses say they’ll be impacted by Brexit, with 63% of businesses characterising this as a strong impact.
Survey respondents, including business owners from Ireland, cite as important a need to know how Brexit will impact tax and duty reporting, safety standards, personal data, the free movement of people, and the free movement of goods – among other things.
The unfortunate reality of Brexit is that it affects all of the UK’s European neighbours—with particular emphasis on businesses that trade heavily with the UK, such as Ireland.
According to the Central Statistics Office, 11.5% of Ireland’s exports go to the UK, while just over 16.4% of Ireland’s services also serve that country.
Both figures were formerly higher, but have fallen due to Brexit uncertainty.
Irish businesses face an immediate requirement to adapt because free trade in both goods and services from the European Union (EU) to the UK are set to change—potentially as early as the end of March 2019.
In other words, a root and branch evaluation of practices and processes is required from all businesses.
This article answers frequently asked questions about Brexit that might kick-start this process in your organisation, covering the following topics:
- What is Brexit?
- What’s going to happen in the UK because of Brexit?
- What’s going to happen in Ireland because of Brexit?
- When does Brexit happen?
- How does Brexit affect trade and how will Brexit affect my business?
- How will Brexit affect VAT payments?
- How long will it take for me to adapt for Brexit?
- My business is based in Ireland and only has Irish customers. Will I be affected by Brexit?
- Will I still be able to employ UK citizens after Brexit — and will Irish employees be able to work in the UK office?
- How do I perform a Brexit impact assessment?
- How will Brexit affect the GDPR?
- What official advice is there about how Brexit will affect my business?
- My business is struggling because of Brexit — is there any financial help available?
- Are Sage products ready for Brexit?
1. What is Brexit?
In a referendum on 23 June 2016, the UK electorate voted to leave the EU. Negotiations commenced immediately between the UK and EU governments to decide how the movement of goods, services, people and capital across the UK/EU borders will be processed following Brexit.
The UK government triggered Article 50, a clause of the fundamental Treaty on European Union, intended to commence the departure of a member state from the bloc.
Key from a business perspective is that, as an EU state, Britain is a member of the EU’s single market and customs union, which enables its 28 member states—including Ireland—to function as a single trading area with no tariffs or border checks, and with a combined VAT system.
For any EU company exporting to the UK, all this will change to a greater or lesser degree following Brexit.
2. What’s going to happen in the UK because of Brexit?
There are widely agreed to be three potential Brexit outcomes that mean differing things for businesses:
On 14 November 2018, the EU published a 585-page draft withdrawal agreement that had been agreed by both UK and EU negotiators.
It would allow for a soft Brexit—which is to say, the “four freedoms” central to the EU’s mission—comprising the movement of goods, services, people and capital—will be easily facilitated between the UK and EU in some fashion following Brexit.
There would also be a transition period ending 31 December 2020, during which negotiations will continue, and much EU legislation will continue to apply to the UK.
This so-called soft Brexit agreement was rejected in two votes by the UK government. Its future is unclear, but it may be picked up again in the event of a delayed Brexit (see below).
In the event of the Brexit date occurring without a negotiated settlement in place, or without an extension of the deadline set in the Article 50 declaration, the UK will leave the EU immediately.
All EU legislation, regulations and institutions will cease to be observed within the UK—and also by the remaining 27 EU states with regard to the UK.
The UK will take on “third country” status in the eyes of countries within the EU. This means it would be treated the same as countries that lack any free trade agreements for tax, customs and the movement of goods and people within the EU.
As a member of the World Trade Organisation, the UK will be forced to treat EU countries as “most favoured”, meaning they will have to apply the same default trade tariffs and practices as they do with all other countries for which there isn’t a trade agreement in existence
There will be no transition period in this eventuality, also known as a “hard Brexit”.
Both the EU and UK governments have issued several technical notes explaining how a no-deal Brexit would impact various industries, institutions and business processes.
Both the UK government and the EU have clearly stated they’d prefer to avoid a no-deal Brexit but it is a very real possibility at this stage.
There are rumours that the UK government will request an extension of the deadline stated in the Article 50 declaration in order to gain more time to create a negotiated withdrawal agreement.
Alternatively, some campaigners in the UK would like a second referendum to confirm either that Brexit is indeed a choice the country wishes to take, or to vote on any withdrawal agreement.
However, both these two eventualities are mere discussion topics at present.
3. What’s going to happen in Ireland because of Brexit?
This answer is best answered by remembering Ireland is a state within the EU.
The broad specifics of how Ireland will continue to trade goods and services with the EU is therefore the same as how any other EU country will do so, such as France or Germany.
Although, the movement of people across the Irish border is likely to be unique thanks to the Common Travel Area, which should mean UK and Irish citizens will be able to move freely between the two countries (see Will I still be able to employ UK citizens after Brexit—and will Irish employees be able to work in the UK office? below).
However, from an administrative standpoint, Irish businesses are likely to be impacted in the same ways as other European business.
The UK will leave the EU VAT Directive, for example, which will affect how and potentially when VAT needs to be paid on goods and services exported or imported by Irish businesses.
Customs duty and paperwork will almost certainly change for Irish businesses importing or exporting to the UK. Even things like whether EU nationals can drive or hire vehicles in the UK could change.
The EU and Irish governments have created substantial guidance on all of these issues (see What official advice is there about how Brexit will affect my business? below).
The sensitive issue of the Irish border remains at the core of ongoing discussions between the EU and UK. The issue of the “backstop” — a contingency measure intended to facilitate free movement of goods and services across the border following the withdrawal period — is the main reason why the withdrawal agreement has been unable to pass through the British parliament.
In the event of a no-deal Brexit outcome this could switch to becoming a harder border, with a customs presence delaying the movement of goods.
Aside from the political ramifications of this, this will profoundly affect businesses in terms of administrative requirements, plus the time taken to move goods. There might also be cost implications.
4. When does Brexit happen?
The UK officially leaves the EU at 11pm (BST) on 29 March 2019.
It’s important to remember that, unless Article 50 is extended, the UK will exit the EU on this date regardless of whether there’s a withdrawal agreement in place, or the UK faces a no-deal scenario.
5. How does Brexit affect trade and how will Brexit affect my business?
In broad terms, and outside of specific industries such as farming or medical research, the following areas of business will likely have to be examined and potentially revised once the UK leaves the EU, largely because the UK will no longer recognise institutions that oversee these areas, or will no longer be a part of the EU free trade area:
- Export and import of goods and services to the UK, including associated VAT payments and (potentially) custom and excise duties.
- Employment of Irish or other EU citizens in the UK, and UK citizens in Ireland.
- Transport and logistics from Ireland or other EU country to and from the UK, including fulfilment.
- Product safety or eco-compliance for products exported to the UK, including packaging and labelling.
- Copyright, trademarks and patents.
- Transfer of personal data between the EU and UK.
- Mutual recognition of qualifications and relevant licences (including audit, banking and insurance licences).
6. How will Brexit affect VAT payments?
Currently both Ireland and the UK are part of the EU VAT Directive. Business-to-business (B2B) sales are typically invoiced by the EU VAT registered supplier at zero rate.
The customer then accounts for the purchase at the local VAT rate directly on their VAT return. In other words, if an Irish business buys from a UK business, there is no immediate need to pay VAT.
Following Brexit the UK leaves the EU VAT Directive and there have been concerns among Irish businesses that they would need to pay VAT immediately when goods arrive in Ireland from the UK, which would have a major effect on cash flow.
However, the proposed Brexit Omnibus Bill announced within the Dáil Éireann on 22 February 2019 means businesses would account for VAT on UK imports—and pay it—in their regular VAT returns every two months (or other taxable period that the business has authorised with the Collector-General).
Although the Brexit Omnibus Bill is still to be debated, the Irish government has indicated it intends to pass it prior to the Brexit date of 29 March 2019 in the event of a no-deal scenario.
7. How long will it take for me to adapt for Brexit?
It’s impossible to say but, according to the YouGov survey, businesses in the EU report an ideal period would be nine months.
It’s likely much of the adaptation for businesses will take place in a transition period across 2019 and 2020.
Of course, if there’s a no-deal Brexit outcome then businesses will have no choice but to adapt immediately as of 29 March 2019.
8. My business is based in Ireland and only has Irish customers. Will I be affected by Brexit?
It’s certainly possible that Brexit will have minimal impact on your business but it’s important to consider your business processes from as many angles as possible.
For example, you might be a car maintenance business with only local customers. But the replacement parts you require might be manufactured in the UK, or warehoused there, so you may need to source new suppliers to avoid possible delays and extra costs involved with potential customs duties, or plan these delays and fees into your existing procedures.
Items manufactured in other EU countries might have to pass through the UK before being dispatched to you, and could therefore be affected in terms of import duties (that could involve goods being delayed in customs clearance areas) and the logistics of getting them to you.
You might hold data on UK citizens who are customers, or suppliers, in which case sharing it with suppliers or customers in the UK might require special measures (see How will Brexit affect the GDPR? below).
The business might have a trademark that you wish to continue to protect in the UK, although it’s not yet clear what protection mechanisms will be in place for non-UK businesses following Brexit.
A business might also rely on UK citizens for staffing. This might not just be in your front-line staff but potentially within ancillary or support roles, such as office maintenance or cleaning.
These might be sub-contracted through agencies, of course, so your contact with them might be minimal but they might nevertheless have a key role.
If nothing else, all Irish businesses will serve a client or customer base that will be affected by Brexit changes so some forethought on how Brexit will apply to your business is necessary.
Of course, there are likely to be business benefits provided by Brexit. Irish manufacturers or service players serving Irish businesses are likely to be in demand because of any newly-arisen difficulties and issues surrounding imports from the UK.
Similarly, the potential difficulties in data transfer between the UK and EU—at least initially—might mean that Irish companies switch to data storage services based in Ireland.
As such, there are certainly business opportunities presented by Brexit that should be part of any preparedness plan, in addition to measures to overcome issues.
9. Will I still be able to employ UK citizens after Brexit—and will Irish employees be able to work in the UK office?
The Common Travel Area (CTA) predates the EU’s allowances for free movement of people and will become key following Brexit for both UK and Irish citizens wanting to work in each others’ countries.
The CTA allows UK and Irish citizens to move freely across the border and allow them to work as well as receive access to healthcare, education, and social benefits.
The Government of Ireland says there’s “no reason to expect that a no-deal Brexit would affect the operation of the CTA” although the post-Brexit details are still under discussion and are contained within the Protocol on Ireland and Northern Ireland.
The situation will be different for other EU citizens wanting to live and work in the UK.
Under current UK government proposals, non-Irish EU citizens will have to apply for and receive “settled status” (indefinite leave to remain) if they’ve been living in the UK for five years or more, or pre-settled” status if they’ve been in the UK for between six months and five years.
Notably, both these two requirements apply even if the EU citizen is married to a UK citizen.
10. How do I perform a Brexit impact assessment?
Businesses should discover how Brexit will impact them in order to revise existing processes and plan any necessary changes (including contingency plans for the Brexit transition period).
The first step is to organise an impact assessment. Here are some questions to kick-start the planning and discussion processes: (This list is by no means exhaustive or authoritative.)
Employment and services
How is your workforce affected? Do you employ any UK citizens, in the UK or in Ireland, or do you plan to?
Does your business rely on any specialist or service located in the UK – even if you ordinarily communicate with an Irish-based branch of the business?
Do any of your staff need to travel to the UK? Does your business have any UK-specific trade union obligations?
Do any standards govern the work you do in the UK, such as European EN standards?
Import/export and logistics
Does your business import or export goods to or from the UK? Do you use an agent or utilise license schemes?
Do you or any of your suppliers temporarily store goods in a warehouse based in the UK, even if they’re manufactured elsewhere (such as China)? Do you work with fulfilment agencies?
Taxes and money
Is your business VAT registered or do you operate under the MOSS agreement in order to supply the UK?
Does your business hold money in UK financial institutions? Does your business rely on funding or grants that come from the UK?
Does your business own any patents, trademarks or registered copyrights that are enforced in the UK?
Does your company manufacture products that must certify to the planned UK-specific safety, security or ecological standards?
Is any of your data hosted in the UK (including cloud storage)? Do any employees travelling within the UK have mobile phone coverage for both data and calls?
Do you hold personal data about people based in the UK?
Do you provide any services that are restricted to people holding a relevant qualification required to operate in the UK?
Do you dispatch goods or documentation to the UK via postal or courier services?
11. How will Brexit affect the GDPR?
The UK government has adopted the GDPR into national law as part of its Data Protection Act 2018, so once the UK leaves the EU, the same protections and requirements will apply.
In other words, how British businesses handle personal data for individuals in the UK and EU won’t change following Brexit if they have correctly implemented the GDPR within their processes.
Following Brexit the UK is hoping to become a “favoured nation” via an “adequacy decision” on behalf of the EU, which should facilitate the free transfer of data between the UK and EU states without the need to implement additional safeguards.
However, this may not be in place immediately following the Brexit date and will probably be completed during the transition phase.
The EU has published a Notice to Stakeholders discussing potential outcomes for data protection.
12. What official advice is there about how Brexit will affect my business?
Under the Brexit Start to Plan scheme businesses can get professional advice or support about Brexit issues, up to a value of €2,250/£2,000 (including VAT).
To be eligible, businesses must have 250 employees or fewer, and a turnover of €50 million or less (or sterling equivalent).
There’s also a series of podcasts looking at how various sectors can adapt to Brexit.
The EU has produced its own list of preparedness documentation, although many of these focus on a hard Brexit scenario.
13. My business is struggling because of Brexit—is there any financial help available?
The Strategic Banking Corporation of Ireland (SBCI) is offering a Brexit loan scheme, supported by the EU along with Irish government departments such as the Department of Business Enterprise.
The loans are intended to help businesses that are facing difficulties because they export or import products, services or raw materials to or from the UK, including Northern Ireland.
The loans offer between €25,000 to €1.5m and are available through IAB, Bank of Ireland, and Ulster Bank. The interest rate can’t exceed 4% and terms can last up to three years.
If businesses borrow less than €500,000 there’s no requirement for security.
The loans can be used for working capital, or to fund innovation, change or adaptation that’s required because of Brexit.
There are limitations. Chief among them is that the loans are not for large businesses, which is to say the business must have fewer than 250 employees, a turnover of €50 million or less, and be an independent enterprise.
Of course, it must also be established and operated in the Republic of Ireland. Businesses involved in agriculture or aquaculture can’t apply.
Notably, however, the loans can’t be used for refinancing because of financial difficulties, and can’t be used to refinance any existing debt (including leases or hire purchase agreements).
Businesses that are bankrupt or being wound-up can’t apply, and nor can those that have entered into an arrangement with creditors in the last five years.
14. Are Sage products ready for Brexit?
Sage has project teams who are focusing on preparing for implementations influenced by Brexit, whatever the outcome.
These include a programme of work designed to ensure all areas of our business and products will be ready for Brexit, irrespective of whether a withdrawal agreement is reached.
Sage has always placed a high level of importance on legal compliance and customers can trust that Sage will address Brexit with the same attention and focus as is customary.
How will Brexit affect businesses? Final thoughts
There’s no doubt that preparing a business for Brexit continues to be difficult due to the current uncertainty.
In all likelihood, this situation isn’t likely to change until the transition period ends in December 2020 (assuming a negotiated withdrawal outcome occurs).
However, as we’ve shown here, there’s a lot of information available to help you prepare, and funds to ease the transition too.
Making good use of it can mean the difference between being ready for Brexit and being left behind.