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First Thoughts on Brexit Vote for Businesses

Although the exit negotiations will be lengthy after the UK Government formally begins the withdrawal process from the EU and nothing will change in law for two years, businesses will need to plan ahead for the eventuality.

Assuming a free trade agreement is negotiated between the UK and the EU, the UK will need to continue to comply with many aspects of EU law. For example, much of UK employment and environmental law stems from the EU and often goes beyond EU law in terms of protection for workers’ rights and the environment. In practice, little change is to be expected.

However, there are specific issues that UK businesses should be thinking about, which include:

  • VAT compliance. The present system of VAT recovery and compliance is likely to change, as VAT will be recovered for EU acquisitions under Article 13 of the relevant Directive, rather than Article 8. In practice, this means that recovering VAT incurred in EU countries may well take considerably longer after Brexit. It is also possible that multiple VAT registrations will be required in different EU countries. This may pose a substantial additional compliance cost.
  • The European Company (also known by its Latin name Societas Europaea or SE). UK businesses using the European Company vehicle will wish to consider its suitability in changed circumstances.
  • Intellectual Property. At the moment, trade marks can be obtained on a community-wide basis through the use of the ‘registered Community design’ and ‘European Union trade mark’, which have EU-wide effect. It remains to be seen how this will work in practice for UK-based businesses after Brexit, although it will clearly be in both sides’ interests to preserve a very similar system, which is the outcome of many years’ negotiation.
  • Debt Collection. At present there is a simplified procedure for the enforcement of debts across the EU. It remains to be seen if this will be preserved. If not, this may be a reason to set up a trading location within the EU to manage sales to EU businesses.

At this stage, it is important to remember that nothing substantial will happen for at least two years. However, Brexit may have implications for future plans and business structures and it will be important to consider your options – especially if you have substantial business relations with entities in other EU countries – and be prepared for the likely eventualities.

We can provide advice specific to your business circumstances and will keep you abreast of changes likely to affect you.