UK businesses without an EU presence will need to act before the end of the year and appoint an ‘indirect representative’ to declare their EU imports and exports, or set up an establishment in the EU, as otherwise they will not be able to trade with the EU, says leading tax and advisory firm Blick Rothenberg.
Alex Altmann, partner at the firm, said: “This will come as a cost shock to many, and it could cost them dearly. The problem is that many businesses just don’t realise what they have to do, and they need to act quickly. Companies from the US and China are now reviewing their supply chains as the UK risks losing its status as a European trading hub for global enterprises”.
He added: “The European Union operates a long-established customs border model for all non-EU countries, which is governed by the Union Customs Code (UCC). The UCC provides that only businesses who are established in the EU can import, or export, goods to or from the EU.”
Alex said: “Businesses who are not established in the EU are required to appoint an EU based representative, who declares their imports and exports to the EU customs authorities on their behalf. These ‘indirect representatives’ are personally liable to pay any duties and taxes due upon an import transaction to the customs authorities. Due to the risk exposure, the number of available ‘indirect representatives’ in the EU are limited and their appointment is usually expensive.”
He added: “The UCC defines an ‘EU establishment’ as a permanent place of business in the EU that maintains human and technical resources to carry on a business in the EU. The reason why the UCC requires overseas traders to maintain an EU establishment is to protect EU duties and tax receipts as any amounts due to EU authorities can be collected or chased for directly from the EU establishment rather than from an overseas location of the trader.”
“Once an EU presence has been setup, the UK business can then also apply for an EU EORI reference and a local VAT number to be prepared for importing goods to, or exporting goods from, the EU. It should also be noted that maintaining a business establishment in the EU could result in a requirement to register a branch in an EU country and to file company branch accounts on an annual basis as well as filing local corporation tax returns.”
Alex said: “As an alternative, a UK business can also incorporate a local EU subsidiary, which, once established, would have access to all EU trade freedoms, including the ability to declare imports and exports. This is what global companies are doing now and an attempt to protect their European supply chains, which will be disrupted for their UK subsidiary.”
He added: “UK businesses should compare the costs attached to appointing an indirect representative, maintaining an EU establishment, or setting up an EU subsidiary to arrive at the right solution for their business. But they need to do it sooner rather than later otherwise they may find that they cannot trade with the EU.”