Brexit - The potential indirect tax impact on your supply chains
A Brexit indirect tax impact assessment can help you to:
- Identify the potential increase in customs duty and admin costs for raw materials, parts or finished goods under the different Brexit models e.g. Norwegian, Swiss, EU Free Trade and World Trade Organisation
- Imported into the UK
- Exported from the UK into the EU
- Exported from the UK to the Rest of World (ROW)
- Make informed alternative procurement decisions for imported goods whether raw materials, parts or finished goods.
- Identify potential operational risk areas in EU sales/distribution models, i.e. Can distance sales models still be used? Can you continue to operate Customs Warehousing or identify alternative models?
- Identify additional statutory compliance requirements, i.e. new VAT registrations and import duties covered under the Senior Accounting Officer Regime.
- Hold informed discussions with the business and external stakeholders (customs brokers, freight agents) to understand and mitigate Brexit costs.
- Discuss the indirect outcomes with the Board / senior executives including likely impacts on the wider MNC’s operating model. Consider alternative operating model scenarios and associated multifaceted issues to mitigate Brexit impacts.
Our Brexit Customs and Trade Impact Assessment tool helps you model the impact of Brexit on your global and EU supply chains. Watch the video:
How could Brexit impact your business?
How could Brexit impact your business?
The Brexit process is not likely to be completed for at least 2 years after the UK officially provides notice to the EU of its decision to leave. During this period the UK will begin negotiations with the EU and the ROW to define our trading relationships.
Currently, the UK is part of the EU which provides free movement of goods and services plus access to Free Trade Agreements (FTAs) with the ROW territories. Trade with the ROW could potentially be subject to increased costs if and when we lose access to the EU FTAs.
As part of Brexit, a customs border looks likely to arise between the UK and EU, treating movements of goods as imports and exports. Customs duty and import VAT will be payable and associated customs declarations will need to be submitted to effect the movement across this new customs border, which could significantly increase the cost of trade with the EU.
Increasing a business' cost of goods may impact profitability and commercial competitiveness, and potentially merits to consider alternative operating models and its broad set of associated impacts, e.g. location of personnel, systems, intra-group arrangements, sourcing, governance and direct tax profile.
Why should you plan for Brexit now?
It is already challenging for a business to understand its end to end supply chain. Brexit will serve to add another layer of complexity to your international trade.
In order to understand the indirect tax implications of Brexit on your business, it will be useful to fully understand and map your supply chain model, including: what you buy and sell, where you buy it from and sell it to, and how your supply chain logistics work. An impact analysis could include overlaying a customs duty and import VAT analysis on top of your supply chain model to compare the impacts of the different trade relationships that might result from the Brexit negotiations.
It could take a considerable amount of time to undertake this impact assessment and to identify any actions necessary to implement alternative trading operating models and multifaceted workstreams within it.
A Brexit indirect tax impact assessment is an important first step to manage your business through a successful transition to a post-Brexit trading environment
Brexit indirect tax impact assessment in practice:
user-friendly visual representation of complicated import and export data
Getting visibility
Gain a picture of your operating model, supply chain scenarios for imports, exports and EU movements.
Managing change
Model the impact of Brexit changes on your current or future model and monitor the effect of changes.
Enable your business to build an action plan
Modelling the indirect tax impact to your supply chain structure, including an analysis of your import/export data, will help you identify areas of risk and opportunity as you build your Brexit action plan. The indirect tax review of your UK to EU movement data will be a first step in determining the overall impact of Brexit on incremental costs including cost of goods, possible alternatives to the operational model, employee related costs/ changes, etc.
Contact us
Matthew Paul Clark
Head of UK Customs, Excise & International Trade Team, PwC United Kingdom
Tel: +44 (0)7718 339388
