brexit brief what should we do now - pwc€¦ · exact brexit model should be negotiated over 2...
TRANSCRIPT
Brexit Brief – what should we do now
PwC Indirect Tax Forum - 2018
17 April 2018
PwC
What is Brexit?
Most fundamental change to UK trade with the EU and rest of the world in decades, with a new customs border created between the UK and EU.
Exact Brexit model should be negotiated over 2 years following triggering of Art 50. Wasn’t possible now we have a Transition Period until December 2020 / April 2021.
Impact felt by traders now, so many are preparing for Brexit already. With the potential for indirect tax changes to take effect from as early as April 2019.
Political Environment is constantly evolving which creates uncertainty for all EU traders.
Could a redline issue breakdown mean we Brexit before December 2020 / April 2021?
PwC
Deal or no deal?
TIMELINE DEAL STATUS
2017 Q4 Article 50 negotiating period
EU membership terms2018 Q1
Q2
Q3
Q4
2019 Q1
Q2 Transition - ‘Extra time’
Outside the EUBut market access ongoing for business purpose
‘four freedoms’ apply, ECJ applies; no UK votes – rule taker, not maker
No Deal
WTO trading termsQ3Q4
2020 Q1
Q2Q3Q4
2021 Q1 Full Deal(starting with an ‘implementation’ /period?)
“Canada + +++”
No Deal
WTO trading termsQ2
Q3
UK outside of the Customs Union, outside of the Single Market and outside of Freedom of Movement rules
Slide 3
PwC
Type of businesses and industries impacted by Brexit
4
UK businesses that frequently
• purchase raw materials or finished goods from other EU Member States
• import goods from non-EU countries with EU FTA’s or that are subject to tariff suspensions
• sell raw materials or finished goods to EU customers
• sell raw materials or finished goods to non-EU countries we have FTA’s with
Overseas businesses that frequently
• EU businesses that purchase raw materials or finished goods from the UK
• EU businesses that sell raw materials or finished goods to UK customers
• Non-EU businesses that purchase raw materials and finished goods from UK suppliers under FTA agreements
• Non-EU businesses that sell raw materials and finished goods to UK purchasers under FTA agreements
Typical Industries – most affected by Brexit (due to higher duty rates)
• Automotive (manufacturers and parts suppliers)
• Fashion (accessories, clothing and shoes)
• Food (foodstuffs, finished foods and beverages)
• Electrical / Machinery (household electricals / industrial machinery, not computers)
• Remember any business moving high volumes of goods can have a huge Brexit cost!
Everyone trading in any type of goods between UK and the EU
Anyone importing into or exporting from the UK to Free
Trade Agreement countries
Possible landing zones
EU exit with FTA and supporting agreements
in place, based on best previous agreed
provisions
Free Trade Agreement (CETA): A
comprehensive FTA, modelled on EU best in-
class FTAs (e.g. CETA), with some enhanced
alignment on regulations and customs
Agreement to cooperate on alignment of
regulation, including limited equivalence and
mutual recognition, with bilateral dispute
mechanism with recourse to WTO.
Tariff free access for manufactured and most
agricultural goods. Customs procedures
introduced for EU goods trade with agreed
streamlining. Agreement on which service
sectors will remain open and exemptions.
Labour mobility is streamlined, with
facilitated visa regimes limited to certain
professions or visa categories.
Continued paid access to Horizon 2020. UK
continues to collaborate with EU on innovation,
data sharing and IP
EU exit with no FTA in place.
WTO agreement: A comprehensive
agreement is not reached and the UK
moves to a default WTO trading
relationship
No agreed regulatory cooperation.
Potential for future divergence. Loss of
market access in some areas, particular
heavily regulated sectors.
UK trades goods with the EU / EU-FTA
countries on WTO. No preferential
clearance programmes are in place,
creating delays and costs
No facilitation of free movement between
UK-EU. More restrictive visa regime
introduced.
Loss of access to all EU funding. UK
diverges from the EU – restricting data
sharing, innovation and IP
People
Regulation
Commercial
& trade
Innovation
EU exit with ambitious bespoke FTA and
supporting agreements in place
Free Trade Agreement (“Canada Plus Plus
Plus”): A comprehensive FTA, building on EU
best in-class FTAs, with extensive alignment
and high degrees of flexibility
Agreed harmonisation of regulatory
outcomes (goods and services) and mutual
recognition. Enhanced bilateral dispute
mechanisms / court. Ongoing UK membership
of key EU agencies.
Tariff free access for all goods meeting Origin
Rules. Customs procedures are streamlined.
Extensive negotiated access for services based
on extensive regulatory alignment and/or
mutual recognition.
Quasi-free movement of workers with
priority skills with generous agreed quotas
and/or triggers for controlled movement.
Continued paid access to Horizon 2020. UK
continues to collaborate with EU on innovation,
data sharing and IP
Canada ‘base model’‘Canada plus plus plus’ ‘No deal’
Analysis of the negotiating red lines from the UK and EU allows for the possible landing zones for the future deal with the EU to be mapped in sufficient detail to allow meaningful plans, with defined triggers, to be built now.
PwC
Planning for the impact of BrexitImpact mostly focused in 3 key areas
How will Brexit affect the UK economy, the value of the GBP, and demand for an industry or business’ products?
Strategy &business plan
What does trade between the UK and the rest of the world look like following Brexit and what impact will this have on cost, admin and time?
Trade &customs 1 3
What impact will changes to immigration in the light of Brexit have on the workforce, operating models and how can the industry and individual businesses prepare?
People &immigration 2
PwC
Deal or no deal?
TIMELINE DEAL STATUS
2017 Q4 Article 50 negotiating period
EU membership terms2018 Q1
Q2
Q3
Q4
2019 Q1
Q2 Transition - ‘Extra time’
Outside the EUBut market access ongoing for business purpose
‘four freedoms’ apply, ECJ applies; no UK votes – rule taker, not maker
No Deal
WTO trading termsQ3Q4
2020 Q1
Q2Q3Q4
2021 Q1 Full Deal(starting with an ‘implementation’ /period?)
“Canada + +++”
No Deal
WTO trading termsQ2
Q3
UK outside of the Customs Union, outside of the Single Market and outside of Freedom of Movement rules
Slide 7
PwC
Key Risk Areas
PwC
Trade and customs impactsSpecific impacts will vary by sector and company
There are 16 factors within three overall categories that will be negotiated, and that therefore will provide uncertainty to trading businesses.
Not all of these will be relevant to all businesses but this represents the ‘checklist’ as to what might move for or against a sector or company.
PwC
Turning planning into action – What to do now
10
Our scenarios analysis indicates that there are several areas where impacts will be felt in all scenarios, meaning there are some ‘no regret’ decisions that can be made now, that will build readiness for whatever may happen.
Appoint a person or team to get your business ready for Brexit. Do they have sufficient C-Suite backing?
1 Undertake a Brexit Impact Assessment – Trade & Customs, People & Immigration and Strategy & Business.
2
Create a Brexit Step Plan, pull together stakeholders for change, understand each action and timeline them over next two years.
3Don’t simply plan for Brexit but for your trading years beyond it!
4
PwC
Turning planning into action – No Regret Actions
Anticipated impact “No regret” Actions to consider now
New customs declarations for EU trade
Review and upgrade your IT systems and data processes to record EU trade accurately Review and upgrade your product data to ensure imports and exports are appropriately classified for customs purposes
Customs declaration complexity and border delays
Apply for customs facilitations, to ease administration at the border, reduce clearance times or negate the double payment of customs duty and import VAT e.g. AEO, CFSP, Customs Warehousing
Mapping your Supply Chainswill they meet the rules of origin thresholds for UK content
Map your supply chains to understand the impact of this new international border on admin costs and indirect tax costsIdentify the levels of EU, non-EU and domestic content in main product to ascertain whether customs duty cost can be negated
Contractual / commercial exposure from supply chain
Updating contractual terms with key customers and suppliers - in particular freight and logistics - clarifying distribution of risks and Brexitrelated costs
Reduced access to EU labour and workforce
Identification of EU nationals in workforce and support with registration for Settled Status or other residency rights
11
Our scenarios analysis indicates that there are several areas where impacts will be felt in all scenarios, meaning there are some ‘no regret’ decisions that can be made now, that will build readiness for whatever may happen.
PwC
Specific example of a 2 year Brexit plan
This publication has been prepared for general guidance on matters of interest only, and does not
constitute professional advice. You should not act upon the information contained in this publication
without obtaining specific professional advice. No representation or warranty (express or implied) is given
as to the accuracy or completeness of the information contained in this publication, and, to the extent
permitted by law, PwC LLP, its members, employees and agents do not accept or assume any liability,
responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in
reliance on the information contained in this publication or for any decision based on it.
© 2018 PwC LLP. All rights reserved. In this document, “PwC” refers to PwC LLP which is a member firm
of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.
Contact information
Matthew Paul ClarkHead of PwC - Customs, Excise & International Trade Team
Office location: UK – Embankment Place, LondonMobile +44 (0) 7718 339 388Email: [email protected]