If you are small business owner and your company trades with the EU, are you prepared for Brexit? With Brexit looming, you will need to position your small business to avoid the least disruption and damage to you and your customers or clients. A Brexit Clause is something you may want to consider with your EU clients and suppliers to protect each other’s interests and keep costs under scrutiny in these uncertain times.
Practical steps to take action now
Let’s face it, unless you have a crystal ball ,the threat of Brexit, and when it will take place, is a mystery. Whether soft, hard or no-deal, if you trade with companies in the EU you need to think about what you can do now to help you prepare for any eventuality, with your customers or clients at the centre of your planning and preparation.
For example, do you need to pre-purchase goods to avoid the risk of border delays after Brexit takes place? Or could you be affected by new tariffs affecting your pricing and profit for products or services?
There are practical steps you can take now as a small business owner to help you survive whatever eventuality takes places when the UK leaves the EU.
At the heart of your small business are your clients, and we strongly suggest you discuss and connect with all your EU clients and suppliers to evaluate each other’s concerns taking a risk based approach.
Have you considered a Brexit clause?
With new EU clients and suppliers you could consider incorporating a Brexit clause in contracts, in particular for long-term contracts, where the implications of Brexit will become apparent in the fullness of time. Similarly, a Brexit clause could also be incorporated into existing contracts with EU suppliers and clients to help facilitate discussions and a collaborative approach.
What could a Brexit Clause look like?
One major aspect of a Brexit Clause relates to trading costs between you and your EU client or supplier and could relate to any new laws or regulations that come into force, say, within the first five years after Brexit happens.
Discussions around trading costs could involve how you split the costs between each other and you can discuss various safeguards to be put in place via your contracts, acknowledging if costs spiral out of control for either side you are both protected. For example, if costs exceed a certain threshold, say £5,000 per year for either party in a given year, then either party has the rights under the Brexit Clause to terminate. Other unexpected costs to consider relate to currency costs, for example, where a fall in the pound against the euro could mean that trading between both parties is not sustainable and becomes too expensive.
Here are some other considerations or safeguards that small businesses may want to consider discussing with their EU clients and suppliers when considering incorporating a Brexit Clause into existing or new contracts:
Staff implications: Do you hire staff or contractors who regularly travel to the EU for business purposes? The change in visa requirements post Brexit for individual EU countries, as well as change in immigration law, could affect how your business is run, increase staff running costs and have a direct impact on your employees well being.
Currency fluctuations: Already mentioned above but deserving a standalone mention is currency risk, a real threat to businesses trading between the UK and EU with much fluctuation expected to continue for the foreseeable future. You will also need to consider, as well as fluctuations, a sustained downfall of the pound against the euro and how this will affect the running of your business, having a direct impact on your profit margins. Any negotiations should be clearly well thought out and consider long-term protection safeguards for both sides.
Standards: If you supply services or manufactured goods to clients in the EU, have you considered what would happen if EU quality standards diverge from those in the UK and how this might affect your supplied products or services and which set of standard will apply?
There may be many other concerns voiced on both sides, which may take time to talk through and incorporate into existing or new contracts with clients and/or suppliers in the EU. Conducted with a spirit of openness and forethought and giving each other time to implement will certainly position you in a stronger position, when or if the UK leaves the EU.
Further guidance has been issued by the Government specifically geared to small business owners and also considers how to navigate through the worst outcome of a no-deal Brexit, found here: trading with the EU if there is no deal.
Mirandus Accountants can help you plan for Brexit
Mirandus Accountants are your local accountants and tax advisors in Farringdon, Holborn, Clerkenwell, Blackfriars, Old Street and also Edinburgh & the Lothians, providing accounting services, tax returns, corporation limited annual accounting and as a Chartered Tax Advisor Practice, we provide national and international tax advice to individuals and businesses. You can contact us for a tailored solution to your unique personal or business circumstances. Whether you are an individual, freelancer, contractor or you run a small or medium sized owner-managed business, sole trader or limited company, we can help to minimise your tax burden with our tax planning and tax advice services. We strongly recommend you speak with a tax and accounting specialist like Mirandus Accountants, who can provide expert advice for your business and personal tax planning needs.
Call us to book a free no-obligation meeting today.