Import and Export Business Update – Preparing for January 1st, 2020

Whether you import goods to the UK or export from the UK to the EU, this post contains key updates you need to be aware of, and for many, take action on before the end of the year.

After the post-Brexit transition period comes to an end, there are specific changes that EU businesses not currently established in the UK will need to make when moving goods or offering services.

While the primary focus in this post is for overseas businesses who trade with the UK market, there is still pertinent data that UK-EU importers and exporters can benefit from knowing before the changes take effect on January 1st, 2020.

This update offers some practical steps you can take to make sure your business is ready

UK – EU Trade Agreement

As discussions are still ongoing, it is uncertain whether a trade agreement with the EU will be reached before January 1st, 2021. Regardless of whether or not a deal is in place, there will be changes to the following:

  • How businesses provide services within the EU Market
  • The way goods are exported and imported
  • The hiring process for those looking to hire people from the EU

While the government has already launched a major campaign to help businesses prepare for the forthcoming changes, there are still many who need to take immediate action to ensure their business can keep moving.

In the next section of this post will break down the specifics relating to exports, imports, and customs as they stand at present. These changes apply to importers and exporters who work in the EU trading with the UK, and those in the UK trading with the EU.


Customs Information

You will essentially be using the same export and import processes used for non-EU countries without a trading agreement with the EU or UK. In summary, when moving goods across the border, this will mean:

  • The carriers will need specific information to move your goods between territories
  • Import and export declarations are needed to enter or remove goods into or from the UK or EU customs territory

If you already have a UK trading partner, it will typically be the trading partner who makes the UK declaration. Still, the specifics of what you need to do will ultimately depend on the arrangements you have in place with any customs representatives, carriers, or trading partners. If you do not have any of these provisions in place, then you need to get a UK representative to act on your behalf to deal with customs for you.

For a more comprehensive overview of the specifics for those looking to buy or move goods from the UK after Brexit, the government has produced a PDF that can be accessed here.

Other customs-related resources that could be useful to you are linked below:


VAT Information

There will be changes to VAT IT systems and import VAT on parcels you need to be aware of. For organizations selling to UK buyers, you may also need to notify customers of any changes to charges before January 1st, 2021.

If you sell to UK buyers and are based outside of the UK, you will need to pay Import VAT.

  • For goods worth £135 or less, you are responsible for the Import VAT
  • For goods over the £135 threshold, the buyer will need to pay the Customs Duty, Import VAT, and if applicable, any Excise Duty

Aside from the above, key changes are being made to VAT IT systems.

  • A new digital service for the checking of UK VAT numbers will be introduced
  • There will be changes to how you claim VAT refunds for UK business expenses
  • If you sell digital services, there are key changes* to how you pay VAT on services you provide to customers in the UK.


Service-based Businesses

If you operate a service-based business, you will need to check how these services are now going to be regulated and how professional qualifications gained in the European Economic Area and Switzerland will be recognised in the UK after January 1st, 2021.

This is particularly important if any of the below apply to your business.

  • If you send your employees to the UK to do business on your behalf
  • If you are planning to merge with a UK-based business
  • If you have subsidiaries or branches in the UK
  • If your employees provide services within or as part of a regulated profession
  • If you operate within a service sector in the UK

If you employ UK nationals that need a professional qualification to practice in the EU, then you must ensure their qualification is still recognised by the relevant EU regulator.

For further reading and the most up to date guidance on the relevant recognition of professional qualifications, please refer to this section of the government website.


Selling Manufactured Goods

If you manufacture goods that are sent to the UK market, there are going to be key regulatory changes* to approvals, testing, and labelling that come into force on January 1st, 2021. Knowing which rules apply to you depends on the type of goods you manufacture.

*At present, these changes only apply to placing goods into the Scottish, Welsh, or English markets. For Northern Ireland, the guidance will likely be different. If you plan to place manufactured goods in the Northern Irish market from the EU, further guidance can be found here. If goods are coming from the GB region, further guidance can be found here.

 The legislative framework is comprehensive, and for some, rather difficult to follow in terms of knowing which regulatory framework is applicable to your business. If this is something you need clarity on, our company and commercial team here at OGR Stock Denton can help.
 

Changes to CE Markings

This is another major consideration for those selling manufactured goods to the UK market. As part of the preparations needed, you should also check whether or not you need to make changes to your conformity assessment or markings before or after January 1st, 2021.

Before this date, a Pi mark, wheel marking, or CE mark have always been used to place goods onto the UK market. Going forward, the UKCA mark is going to be the conformity assessment marking for most of the goods that today use the CE Mark.

Although for certain products, the CE mark is going to be accepted in the UK until January 1st, 2022, it is vital that your business readies itself as soon as possible to use UKCA markings. I can also confirm that at this point, it will be possible to use both the UKCA and CE marking, as long as you are completely compliant with both EU and UK regulations.

According to the latest government guidance, those businesses that need to use the UKCA mark immediately from January 1st, 2021, include those where all of the following applies:

  • If you are covered under legislation that requires UKCA marking
  • If a conformity assessment has been undertaken by an official body in the UK, and you have not transferred your CA files from the UK body to the EU equivalent prior to January 1st, 2021.
  • If you require a mandatory conformity assessment by a third-party

Understanding Your Changing Legal Responsibilities

For manufacturers, your legal obligations will largely remain unchanged from January 1st, 2021. However, your regulatory requirements, VAT, and customs processes will most likely be affected and require some key changes in order to remain compliant.

For UK suppliers and distributors, it is essential to confirm whether it will be your supplier or your business that will become an ‘importer’ from January 1st, 2021. If it is your business who will be bringing goods from outside of the UK and placing them into the GB market (the rules for NI are going to be slightly different), then you will become an ‘importer’. Here’s a quick summary of how your legal responsibilities could change, along with some of the practical steps you may need to take.

  • Ensure the right conformity assessment procedures have been undertaken and that all conformity markings are compliant under the new legislation.
  • Making sure that all labels for goods include your company name and address – it is possible to provide this information on accompanying documentation until December 31st, 2022.
  • Make sure your business has a system to store all conformity declarations for a period of ten years.
  • Ensure the manufacturer has produced the correct technical documentation for their goods and that all labelling is fully compliant.

Although we are already well into the final quarter of the year, I do expect there to be more changes. While I intend to keep you updated in the form of further posts, you can also sign-up to receive emails directly from the government site here.

If you would like to get guidance on whether or not your goods will be affected and confirm the steps you need to take in order to become compliant with the new regulations, please contact one of our team today for further advice. 

Self-Employment Income Support Scheme (SEISS) extended

The Chancellor has confirmed the extension of the Self-Employment Income Support Scheme (SEISS), with the announcement of a second and final grant to support the income of self-employed individuals during the Coronavirus outbreak.

The first and current round of grants under the scheme allows self-employed individuals to claim a taxable grant worth 80 per cent of three months’ average monthly trading profits, capped at a total of £7,500 and paid in a single instalment.

It has seen 2.3 million claims to date, collectively worth £6.8 billion.

Applications for this round of grants will close on 13 July 2020. However, the Chancellor has now announced that self-employed individuals will be able to claim a second grant in August. This will be worth 70 per cent of three months’ average trading profits and will be capped at £6,570 in total, also paid in a single instalment.

Individuals do not need to have claimed the first grant to be able to claim the second.

Unlike the Coronavirus Job Retention Scheme (CJRS) for employees, self-employed individuals may continue working, begin a new trade or take on new employment while in receipt of a grant.

The full criteria for qualification for the scheme remain unchanged. Applicants must:

  • Be self-employed or a member of a partnership;
  • Have lost trading/partnership trading profits due to COVID-19;
  • File a tax return for 2018-19 as self-employed or a member of a trading partnership;
  • Have traded in 2019-20; be currently trading at the point of application (or would be except for COVID-19) and intend to continue to trade in the tax year 2020 to 2021; and
  • Have trading profits of less than £50,000 and more than half of their total income come from self-employment. This can be with reference to at least one of the following conditions:
    • Trading profits and total income in 2018-19
    • Average trading profits and total income across up to the three years between 2016-17, 2017-18, and 2018-19.

The scheme is not available to people working through their own limited companies.

Further details about how to apply for the second and final grant will be announced on 12 June 2020.

Money laundering supervision payment deferrals and deregistration announced by HM Revenue & Customs

Businesses that require money laundering supervision from HM Revenue & Customs (HMRC) can receive a six-month payment deferral or deregistration where an annual fee is due between 1 May and 30 September 2020, it has been announced.

HMRC is the money laundering supervisory authority for:

  • money service businesses not supervised by the Financial Conduct Authority (FCA)
  • high value dealers
  • trust or company service providers not supervised by the FCA or a professional body
  • accountancy service providers not supervised by a professional body
  • estate agency businesses
  • bill payment service providers not supervised by the FCA
  • telecommunications, digital and IT payment service providers not supervised by the FCA
  • art market participants.

Businesses in these sectors must pay an annual renewal fee of £300 in respect of each premises covered.

However, on receipt of the reminder notification from HMRC they can now choose either to pay in the normal way or to pay at any time in the following six months.

Businesses that have closed and stopped all activity subject to the Money Laundering Regulations owing to the Coronavirus crisis can opt to deregister for supervision and reregister when they resume. However, Money Service Businesses, Trusts and Company Service Providers cannot trade until the reregistration process is complete.

Maximum Government-backed loan amount for larger businesses increased to £200 million

The Government has announced an increase in the maximum amount that larger businesses can borrow under the Coronavirus Large Business Interruption Loan Scheme (CLBILS) from £50 million to £200 million.

CLBILS loans are offered on normal commercial terms, but are backed by a Government guarantee worth 80 per cent of the amount borrowed. They can be accessed through the 12 accredited lenders for the scheme by the British Business Bank.

The increase will come into effect from Tuesday 26 May 2020 and will mean that larger businesses can borrow up to 25 per cent of turnover, subject to a maximum of £200 million.

At the same time, the Government has introduced restrictions on dividends, share buybacks and executive pay for firms benefiting from CLBILS loans of more than £50 million.

The restrictions will also apply to large businesses accessing the Bank of England’s Covid Corporate Financing Facility (CCFF).

More details about these restrictions are expected to be set out by the British Business Bank on 26 May 2020.

Coronavirus Future Fund open to applications

The Future Fund, which offers convertible loans of between £125,000 and £5 million to innovative companies facing financial difficulties as a result of the COVID-19 pandemic has opened.

The fund is designed to support UK-based companies that have acquired at least equal match funding from private investors.

Aimed specifically at businesses that typically rely on equity investment, the fund is a lifeline for firms that cannot access other forms of Government business support because they are either pre-revenue or pre-profit-based.

To be eligible a business must:

  • be UK-incorporated – if a business is part of a corporate group, only the parent company is eligible
  • have raised at least £250,000 in equity investment from third-party investors in the last five years
  • not had any of its shares traded on a regulated market, multilateral trading facility or other listing venue(s)
  • have been incorporated on or before 31 December 2019.

Businesses will also need to demonstrate that at least one of the following is true:

  • half or more employees are UK-based
  • half or more revenues are from UK sales.

The Future Fund is being delivered by the British Business Bank and will remain open until September.

A Convertible Loan Agreement has been created for those who intend to apply, which can be found here. Further details of this loan scheme and how to apply can be found on the British Business Bank website.

Coronavirus Commercial Property Q&A

Like many other sectors, the commercial property industry has been significantly affected by the coronavirus pandemic and the subsequent Government lockdown and economic slump.

The rules around commercial leases have also been changed temporarily, to help businesses that are struggling due to the crisis, which has left landlords and property management firms with many questions.

To try and provide clarity to this ever-evolving situation, we have looked at some of the most common questions landlords have and provided answers to help them better understand the current rules regarding commercial leases.

Can my tenant stop paying rent or end their lease? 

Considering the extreme financial strain that many businesses are experiencing many tenants are beginning to refuse to pay rent, ask for a reduction in rent or are seeking to terminate their lease early.

Whether a tenant can do this and on what grounds will vary from one lease to the next, depending on what was agreed under the original terms of the lease.

Landlords should review and consider:

  • any break clause that allows tenants to terminate the lease early;
  • any turnover provisions dependent on the income generated from the premises; and/or
  • any force majeure clause.

Most leases provide for rent to be payable without deduction, meaning that tenants will not be able to withhold rent because of COVID-19, unless any specific lease provisions allow them to do so. Meanwhile, rent suspension clauses generally only relate to where a property is damaged or lost altogether due to destruction.

The common law doctrine of frustration may come in to play when it comes to terminating a lease. Tenants may try to prove that there is some form of illegality or failure of common purpose that renders performance of the lease/contract impossible or so radically different from the parties’ expectations and that termination is therefore justified.

This approach is yet to be thoroughly tested via the courts and it is not clear whether the narrow definition of frustration applies to a commercial lease. A court is not likely to relieve a tenant of their contractual obligations as the bar set for such a claim is very high.

My tenant has stopped paying rent, can I evict them?

As part of the Government’s Coronavirus Act 2020 (the Act), new measures were introduced to protect commercial tenants. Section 82 of the Act bans the forfeiture of commercial leases until 30 June 2020 for non-payment of rent due to COVID-19, thus preventing evictions.

It is not yet clear whether the Government intends to extend this period further, but it has indicated it may depend on the requirements of the lockdown period.

My property is empty, but trespassers have moved in, does this rule prevent me from evicting them?

No – this legislation is designed solely for existing tenants. If you have trespassers or squatters in your property you can still undertake a repossession order under the existing rules.

If I cannot evict them, do they still have to repay the rent owed?

Yes – despite the Government’s move to prevent evictions from commercial premises, rent arrears will still accrue and are expected to be repaid in future.

In some cases, this may be by agreement between a landlord and tenant, but in other cases, landlords may be required to seek debt recovery procedures to recover rent that is owed (be aware that some procedures have been temporarily banned). Before taking either step it is recommended that you seek legal advice.

If I can’t evict them can I take other debt recovery steps, such as a statutory demand?

The Government has temporarily banned the use of statutory demands (made between 1 March 2020 and 30 June 2020) and winding up petitions presented from Monday 27 April, through to 30 June, where a company cannot pay its bills due to coronavirus. This will help ensure these companies do not fall into deeper financial difficulty.

The Government is also introducing new legislation to provide tenants with more breathing space to pay rent by preventing landlords using Commercial Rent Arrears Recovery (CRAR) unless they are owed 90 days of unpaid rent.

However, the Government has made it clear that tenants shouldn’t use this as an opportunity to avoid paying or delaying a rent payment if they are not significantly affected by COVID-19.

What other steps should I be taking if I cannot use debt recovery or forfeit the lease via an eviction? 

Most standard commercial leases include an obligation on the tenant to comply with all statutes and notices or orders made by competent authorities, which means that they would be in breach of that covenant if they fail to comply the Government’s current COVID-19 directions. Landlords also must comply with this and it is why you should try to work with tenants to come to a suitable arrangement.

Therefore, in the first instance, it is advised that you seek legal advice before opening up a dialogue with your tenant. Once you have taken appropriate legal advice you may wish to come to an agreement with your tenant over current and future rent payments. Depending on your own needs it may be possible to agree on how the rent will be paid in future, including a method for making up rent arrears.

I have a commercial mortgage on the property that needs to be paid, what support is available to me? 

The Government has supported the buy-to-let residential sector via guaranteed mortgage holidays, however, the same support hasn’t been offered to commercial landlords that have a mortgage to pay.

Despite this, many lenders are extending similar offers to commercial landlords and it is recommended that you speak to your mortgage provider to secure a payment holiday if you require one.

I’m a landlord for a property that is in a wider shopping centre/area that is required to close as a result of the COVID-19 measures?

If a larger landlord closes a centre or any common parts, tenants and their landlords will need to check the lease as to the overall landlord’s obligations and any potential claims.

My tenant is eligible for a grant based on their business rates. However, I pay their business rates as part of the rental agreement. Can I receive the grant instead? 

The grants are given to the ratepayer, who would presumably be the landlord in this case. Unless the rateable value of the hereditament is less than £15,000 (in England) the landlord would not qualify for the grant. The landlord would, in any case, need to decide whether to pass on any grants received to the tenants if an offer were made to them.

Should Tenants ‘Keep Open’ their Premises?

Some lease clauses require a business to ‘keep open’ or specify ‘operating/opening hours’. Of course, due to the restrictions that came into effect on 26 March 2020 under the Health Protection (Coronavirus, Restrictions) (England) Regulations 2020, this is no longer possible.

Even if a business can technically remain open, this may not be possible if a business owner decides they do not wish to expose the public to the risk of infection.

Where a tenant is obliged to ‘keep open’ the premises the regulations provide a defence to the requirement if it can be established that by keeping the premises open, they will be acting unlawfully. What’s more, the courts are often reluctant to enforce specific keep open provisions to force tenants to re-open.

I have insurance on the property, could this cover the current disruption to rents? 

Every insurance policy is somewhat different and so landlords should review their policy and speak with their insurance provider or broker to understand what cover is available to them.

While some policies may include business interruption cover, it is unlikely to cover much more than damage to their property or, in a limited number of cases, where Government action has meant that it is illegal for premises to remain open.

Unfortunately, cover for infectious diseases is often an opt-in extra and most will require the disease to have been classified as ‘notifiable’, which COVID-19 has been since 5 March 2020.

Business owners and landlords are finding that their policy, despite various clauses and protections, does not provide a payment as a result of COVID-19. If you believe that your insurer has taken steps to prevent you from claiming under the cover you have, you may be able to take legal action against them, so you should seek legal advice first.

How we can help

We appreciate that you may have many more questions that you wish to ask that are specific to your requirements. If you would like support with your commercial property queries, please speak to our commercial property team.

COVID-19 Top 5 tips for Commercial Tenants

The current lockdown restrictions will have caused problems commercial tenants across all sectors. Our Retail specialist, Robert Rosenberg gives his top 5 tips for commercial tenants:

1. Really this should be one, two and three – TALK to your landlord. Landlords should not be scary but they are scared of this. We all are. They have families too.  You need to “share the pain” with landlords. We recommend picking up the phone and start with small talk. Then tell them how you are having to make cuts but that your staff and customers are so important to keep going.  Then ask them for their help. Start back asking for 3 months’ rent free. This is clearly the best.

2. If you can’t get rent free ask for monthly rents.  If you pay quarterly it is a huge drain on cash flow – if you can pay monthly that is clearly fairer.

3. Ask for a discount off the rent – say 50% for a couple of months.

4. In normal times (if you can remember them) a landlord can change the locks on you if you don’t pay the rent.  Not at the moment – the UK Government has put a stop to that until the end of June.

5. Ask for a lower service charge – if no one is around to tend to the building then the service charge should be lower.

If you need further assistance you can always call us on 020 8349 5504 or send an email and we will do our best to help.