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Brexit: the 12 point plan and what it means for businesses

Prime Minister Theresa May has revealed her long-awaited 12 point Brexit plan, in which she announced that the UK “cannot possibly” remain within the European single market. 

She also announced that the UK will not remain a full member of the EU customs union because full membership “prevents us from negotiating our own comprehensive trade deals”.

There is, however, a promise to push for free trade agreements with European markets. 

So what does this all mean for UK businesses, and what is the difference between the EU customs union and the single market?

The Customs Union

The EU customs union is a type of free trade area, but should not be mistaken for the single market. 

Broadly, the customs union negotiates in international trade as a single trade bloc with the agreement that barriers to trade are mitigated among participating states.  Once goods are inside the customs union, no import duties / tariffs are charged on goods moving between participating states.

The concept of the EU negotiating trade deals, rather than individual member states, is one of the aspects of the common commercial policy that Mrs May cannot accept.

A further concern is the common external tariff that is placed on all goods entering the customs union, which she said will get in the way of free trade agreements outside the EU.

But despite no longer wanting to retain full membership of the EU customs union, Mrs May does want the UK to reach some sort of agreement, whether that means that the UK becomes an associate member or that a completely new agreement is reached, so that some of the benefits are retained whilst allowing other trade deals to be freely negotiated.  

The EU has agreed separate customs unions with Turkey, Andorra and San Marino, although the terms are less favourable and only certain goods are included. 

Until a final deal is agreed between the UK and the EU it is impossible to predict how UK exports and imports are likely to be affected.  But unless an acceptable agreement can be reached, it is likely that leaving the EU customs union will give rise to barriers as all goods will need to be cleared at customs resulting in additional time and costs.

The Single Market

In addition to goods, the single market involves the free movement of services, capital and people throughout the EU.  It aims to break down all barriers to trading amongst members states through the “four freedoms".  It is not possible to take one without the others, which is perhaps why Mrs May stated that staying in the single market would mean “not leaving the EU at all.”

VAT

The VAT territory of the single market currently consists of 28 EU member states, and we can expect to see changes to this tax once the UK leaves the single market.

Once the UK leaves the single market, all goods leaving the UK will become exports and the biggest impact is likely to be compliance with export procedures. 

The onus will be on the seller to make electronic export declarations to HMRC and, depending on the type of goods exported special licences may be required together with payment of the appropriate levies. This may come as a surprise to businesses that are used to trading within the EU but will be “exporting” for the first time.  It is important that they know what is expected of them to avoid unwanted costs or disruption to the business.

For more information about how Brexit could affect your business, or for a discussion with one of our experts, please do not hesitate to get in touch.


 

All content is for general guidance only. It provides an outline, and may not include points which are important in your case. You should not rely on this blog without taking individual advice based on the full facts of your case. This information given was correct at the time of publication. - See more at: http://www.cassons.co.uk/blog/autumn-statement-2016#sthash.mIvcv9P2.dpufAll content is for general guidance only. It provides an outline, and may not include points which are important in your case. You should not rely on this blog without taking individual advice based on the full facts of your case. This information given was correct at the time of publication.

All content is for general guidance only. It provides an outline, and may not include points which are important in your case. You should not rely on this blog without taking individual advice based on the full facts of your case. This information given was correct at the time of publication.


 

20 Jan 17
Helen Cowley