Brexit for businesses

Free trade of goods

Under the Brexit deal, the TCA, the trade of goods between the UK and EU will remain tariff and quota-free. This means that goods crossing the border into or out of the UK will not be subject to direct import taxes or quantity restrictions. 

Crucially, this free movement of goods only applies to products that originate from the UK or EU. This means the products must be ‘wholly obtained’ from the UK or EU or ‘substantially transformed’ in the UK or EU in a way that adds value to them. Goods that are made outside these jurisdictions and pass through them will therefore be subject to tariffs and quotas. For more information on this requirement, please see the government website. 

What is the new border plan?

The UK government has set out its plan for a new border in the south of England to carry out the necessary customs procedures and inspections on goods entering the UK. If your business involves transporting goods across the border with Europe by road, some of the key changes expected to take place from 1 January 2021 are as follows:

• all Heavy Goods Vehicles (HGVs) should obtain a Kent Access Permit before they depart for Dover to transport goods across the border, this is a digitally-acquired certificate required to enter Kent with the intention of transporting goods into the EU

• drivers must have a valid passport to cross the border as national identity cards will no longer be accepted as a valid form of identification

• businesses should check what customs declarations they need to make in order to transport their goods

• businesses should obtain the necessary EORI number, starting with GB (Get an EORI number), this is an identification number required for transporting goods into the EU

How does the Smart Freight System work?

To help businesses prepare, the government has created a Smart Freight System. This is an online portal allowing businesses to register the movement of their goods and check that their hauliers have the required documentation before departure. Drivers will be tracked by number-plate recognition technology and may face on-the-spot fines of £300 if they are travelling without the correct documentation. 

New checks on the UK side of the border will be phased in over a six-month period from the start of 2021, allowing businesses and customs authorities the time to prepare. However, from 1 January 2021, the EU will treat imports from the UK as it would imports from any other non-member, meaning inspections and tariffs will apply immediately.

Which goods require customs declarations?

From 1 January 2021, businesses must declare the import or export of certain goods by a customs declaration. The government has provided advice on the goods that require specific licences or certificates to be imported or exported across the border. 

Businesses importing goods across the border should:

• check what import licences or certificates they need

• check the marking, labelling and marketing standards for food, plant seeds and manufactured goods

• check the rules for importing alcohol, tobacco and certain oils

Businesses exporting goods across the border should:

• check what export licences or certificates they need

• check the marking, labelling and marketing standards for food, plant seeds and manufactured goods

• check the rules for exporting alcohol, tobacco and certain oils

How will VAT change? 

VAT is a tax levied on goods and services that are consumed in the UK and EU. In 2021, VAT can only be levied on goods and services consumed in the UK, meaning most goods being exported to the EU should be charged at 0% VAT. 

Any goods and services being imported from the EU into the UK may require payment of customs duties and VAT. You should:

• check the rate of customs duty on imports from 1 January 2021

• check the rate of VAT 

Certain goods require a conformity mark (also known as a certificate mark) to prove that they comply with the accepted product standards. These regulations are primarily used to ensure that products are safe enough to be used by consumers. For a full list of regulated goods, please visit the government website. 

What is the new UK conformity mark?

As a member of the EU, these goods previously required a CE mark to demonstrate compliance. The CE mark was used to indicate that the goods complied with EU standards on health, safety and environmental protection. From 1 January 2021, goods that were previously sold under the CE mark will require a new conformity mark to be sold in the UK, called the UKCA mark. The UKCA mark should be attached to the product itself or applied to the packaging/associated manuals.

Businesses must comply with the following rules when using the new UKCA mark:

• the mark must only be placed on a product by the manufacturer or their authorised representative (where allowed for in the relevant legislation)

• when attaching the UKCA marking, businesses must take full responsibility for their product’s conformity with the requirements of the relevant legislation

• the UKCA marking can only show product conformity with the relevant UK legislation

• businesses must not place any marking or sign that may misconstrue the meaning or form of the UKCA mark to third parties

• businesses must not attach other markings on the product which affect the visibility, legibility or meaning of the UKCA marking

• the UKCA mark cannot be placed on products unless specifically required by UK legislation

When will the new mark be required? 

Although the UKCA mark is intended to be phased in from the start of 2021, the government has accepted that businesses may need more time to convert to the new conformity system.  Therefore, businesses can continue to sell goods in the UK under the old CE mark until 31 December 2021 where:

• the goods were fully manufactured and ready for market by the end of 2020 

• the business currently uses the CE marking on their goods through self-declaration

• any mandatory third-party conformity assessment has already been carried out by an EU-recognised notified body

• the certificate of conformity previously held by a UK approved body has been transferred to an EU-recognised notified body

The new UKCA marking will not be recognised in any EU country or Northern Ireland. Therefore goods that previously required a CE mark to be sold in the EU will continue to need a CE mark. It is possible for goods to carry both the CE and UKCA marks so long as they are fully compliant with both UK and EU regulations.

Additional requirements for ‘importers’ 

In 2021, where a business transports goods from outside the UK into the UK and sells them on the UK market, it will be classified as an ‘importer.’ As an importer, the business will have additional requirements in relation to product conformity:

• goods must be labelled with the company’s details, including their name and contact address

• goods must conform with the relevant essential requirements

• the correct conformity assessment procedures must be carried out 

• goods must have the correct conformity markings

• the manufacturer must have drawn up the correct technical documentation and complied with their labelling requirements

• the business must keep a copy of the declaration of conformity for a period of 10 years

For more information on product conformity under the UKCA mark please visit the government website, or for further advice, Ask a lawyer.

The trade of services across borders can be carried out in a variety of different forms, these include:

• online services, typically provided through a website

• in person services, when a supplier travels to the client to perform their service

• services provided through a subsidiary company in another jurisdiction

Unlike the supply of goods, services are not restricted by rigid border controls and tariffs. However, the regulations of other jurisdictions can present major obstacles to the provision of services across borders (eg company regulations, immigration laws or the requirement for specific qualifications for service providers). 

As a member of the EU, these obstacles were largely avoided through an integrated services market. By setting the minimum standard of regulations across all member states (eg the General Data Protection Regulations) services could be traded freely across borders. For instance, a professional accountant in London could provide financial advice to a business client in Berlin. 

How will Brexit affect the services sector?

As the UK will no longer be a part of the EU’s integrated services market UK regulations may begin to diverge from the EU standards, increasing obstacles to the provision of cross border services. The potential obstacles include:

• immigration laws preventing service providers crossing borders for business purposes

• restrictions on the incorporation/expansion of businesses and subsidiaries in the EU

• restrictions on the free transfer of data internationally

• lack of mutual recognition of professional qualifications

• lack of mutual recognition of intellectual property between the UK and EU

If your business provides services to the EU, you may want to draw up a Business continuity plan to set out your recovery procedure in the event of Brexit-related disruption.  

How does Brexit affect e-Commerce?

From 1 January 2021 the Electronic Commerce (e-Commerce) Directive 2000 no longer applies in the UK.

This Directive, which relates to online activities in EEA countries, allows EEA online service providers to operate in any EEA country, while only following relevant rules in the country in which they are established.

As the UK has left the EEA, this now no longer applied to the UK. However, the Directive may apply to UK online service providers who operate in the EEA where the services they provided previously fell within the scope of the Directive. Where this is the case, you should make sure that you comply with the relevant requirements in each EEA country you operate in.

To find out how to determine whether the Directive applies to you, read E-commerce between businesses.

You should also note that Online Dispute Resolution no longer applies in the UK where you have made purchases with traders based outside of the UK. Instead, you can get assistance from the Consumer Centre UK. While the Centre is not an enforcement body, it provides advice to consumers to enable them to enforce their consumer rights.

The impact of Brexit on intellectual property rights for EU and UK based businesses varies according to the type of intellectual property right. The UK government has recommended that companies carry out an IP audit to determine their dependence on IP protection in the UK and the associated risks of losing such protection.

The Withdrawal Agreement sets out the various changes that will take effect at the end of the transition period in 2021 for each IP right. These changes will include:

Trade marks 

The UK remained part of the EU trade mark system throughout the transition period, ending on 31 December 2020. During this period, EU-registered trade marks continued to benefit from trade mark protection in the UK.  

From 1 January 2021, new EU-registered trade marks are protected in the EU, but not in the UK. However, all pre-existing EU trade marks will continue to be protected in the UK through the registration of a ‘comparable’ trade mark at the Intellectual Property Office. This process is automatic, so if you currently have EU-registered trade marks they will be automatically copied across into UK-registered trade marks.

Businesses, organisations or individuals that had ongoing applications for an EU trade mark by the end of the transition period have an extension of nine months from 31 December 2020 to apply in the UK for the same protections. This means that such businesses, organisations or individuals have up to and including 30 September 2021 to apply for a UK trade mark.

For more information on ‘comparable’ trade marks, read How to register a trade mark.

The departure from the EU has no impact on the protection and validity of UK-registered trade marks within the UK.

For more information on trade mark protection in the EU after Brexit, please visit the government website. 

Registered designs 

The UK remained part of the EU registered Community design system during the transition period. From 1 January 2021, designs already registered in the EU will be automatically copied onto the UK register. This means that those who currently benefit from EU community protection for their designs don’t need to do anything to ensure the continuing protection of their intellectual property in the UK. 

However, any new designs that are registered with the EU community design system after 2020, will only be protected within the remaining EU member states. To register your designs for UK protection, you must register those designs on the UK register. You can Ask a lawyer if you are concerned about the protection of your registered designs. 

Any pending applications for protection under the EU community design system which were ongoing by the end of the transition period have an extension of nine months from 31 December 2020 to apply in the UK for the same protections. 

For more information on ‘comparable’ design rights, read Design rights.

For more information on registered design rights after Brexit, please visit the government website.

Unregistered designs

The UK will also remain part of the EU unregistered community design (UCD) system during the transition period. This means that 2D and 3D designs that are disclosed in the UK or EU will continue to be automatically protected in both territories as unregistered community designs until 31 December 2020. 

After the transition period ends, designs disclosed in the UK will be protected under unregistered design right in the UK jurisdiction alone. The EU will not provide any reciprocal protection to UK designs. If a UK citizen or business discloses a design in the EU, it will not be granted protection as an unregistered design right in either the UK or EU, and this disclosure may also impact the novelty of their design, should they later seek to protect the right in the UK. 

To offer protection for UCDs, the UK has created a UK ‘supplementary unregistered design’ (SUD). This right will ensure that the full range of design protection provided in the UK before 1 January 2021 will remain available. For more information, read Design rights. 

Patents

Brexit will have no impact on the UK’s membership of the European Patent Organisation (EPO), as it is not an EU agency. Therefore the patent registration and enforcement process will remain unchanged and patents created in the UK will continue to benefit from protection across all members of the EPO. 

Copyright 

Brexit will have no impact on how most copyright protection works between the UK and the EU, as this is governed by separate international treaties. For more information on copyright protection after Brexit, please visit the government website. 

This is a complex area of law so if you have any questions regarding the impact of Brexit on your intellectual property you should Ask a lawyer.

Trade marks and registered design rights - address for services

Applicants for new UK trade marks and registered designs will require a UK, Gibraltar or the Channel Islands address before their application will be considered by the IPO.

Owners of  ‘comparable’ trade marks or design rights are not required to provide such a UK address for a period of three years from 1 January 2021. From 1 January 2024, the IPO will require a UK, Gibraltar or Channel Islands address for service where new contentious proceedings are brought. For more information, visit the government website.

The Trade and Cooperation Agreement has confirmed that personal data can continue to flow freely from the EU (and EEA) to the UK, until an adequacy decision has been made, up to a maximum of six months. 

Note that international transfers of personal data outside the European Economic Area are prohibited unless certain safeguards are in place. Therefore, as a business, you must properly handle the personal information given to you by individuals.

What will happen to the GDPR?

Once the transition period has ended, the GDPR will be retained in UK law and will continue to be read alongside the DPA, with some minor amendments to ensure it can function in UK law. The EU will need to make an ‘adequacy decision’ on the standard of safety that UK data protection laws provide. This will determine whether the UK's data protection regime meets the standards set out under the GDPR.

If the EU deems UK data protection standards to be adequate, then there will be no further safeguards required to transfer personal data between the EU and UK. If not, then the EU Standard Contractual Clauses (SCCs) will need to be agreed and signed between the two parties transferring the data. 

Do I need an EU-based representative?

UK data controllers and processors may need to appoint EU-based representatives from 1 January 2021. This will be required where a business:

• has no offices, branches or other establishments in the EEA (European Economic Area), and

• offers goods or services to individuals in the EEA or monitors the behaviour of individuals in the EEA

Where this applies to your business, you must authorise the representative, in writing, to: 

• act on your behalf regarding your GDPR compliance

• deal with any supervisory authorities or data subjects

The representative can be an individual, company or organisation established in the EEA, and must be able to represent you regarding your obligations under the GDPR. It is essential that you provide the representative with details of who your data subjects are and which supervisory authorities you are subject to.

Who is my supervisory authority?

Supervisory authorities are the relevant public bodies that regulate the flow of data within their jurisdiction, for example the Information Commissioner's Office (ICO) regulates data protection in the UK. It is important that UK businesses identify who their lead supervisory authority is, as these organisations set the rules on data protection within each jurisdiction, and can impose fines or penalties on businesses for breaching those rules. 

At the end of the transition period, UK businesses will no longer benefit from the EU ‘one stop shop’ principle. This previously allowed a business to have just one lead supervisory authority across the whole EEA even when processing data in multiple jurisdictions. 

From 2021 onwards, UK businesses will be subject to the supervisory authorities of the ICO and the domestic supervisory authority of EU member states that they process data within. The supervisory authorities that you must comply with vary depending to whether you have an office, branch or establishment in the EEA:

• Where a UK business processes data within multiple EU member states, and has an office, branch or establishment in the EEA (as well as the UK) they will be subject to the supervisory authority of the ICO and only one member state’s authority - typically the state with the largest customer base.

• Where a UK business processes data within multiple EEA member states, but does not have any offices, branches or establishments in the EEA, they will be subject to the ICO and the supervisory authority of each member state they process data from, meaning they may be liable for penalties from multiple supervisory authorities.

The trade deal between the UK and EU has introduced a level playing field to guarantee fair competition. This means that both the UK and EU are able to take action against each other if they believe one has gained an unfair competitive advantage over the other. For example, if the UK is seen to undermine EU trade rules the EU could retaliate by imposing tariffs on UK exports.

Until the end of 2020, EU regulation on competition law will continue to operate during the transition period. From 2021 onwards, the Competition and Markets Authority (CMA) in the UK will take over from the European Commission (EC) in enforcing competition law.

Anti-competitive activity

From 2021, EU authorities will lose the power to carry out on-site investigations (also known as ‘dawn raids’) in the UK. Instead, their powers of investigation will be limited to making written requests for information from UK-based companies. The CMA will replace them as the central enforcer of competition law in the UK, investigating anti-competitive agreements and any potential abuse of a dominant position.

The majority of EU competition law will be transferred into UK law. In particular, the EU’s Block Exemption Regulation will be retained in UK law beyond Brexit. This means distribution agreements can continue to benefit from the vertical agreement block exemption. 

For more information, please see our guide on distribution agreements and competition law.

Ongoing investigations

Where a formal investigation by EC authorities has been initiated before the end of the transition period, the EU will have the power to continue that ongoing investigation into 2021. 

Also, commercial practices conducted by companies based outside the EU will continue to be subject to potential investigation by EC competition authorities, where there is an actual or potential effect on EU trade. 

State aid

As the goal of EU competition law has always been to generate an integrated market of fair competition between all EU countries, the European Commission has sought to ban individual states from aiding or protecting domestic industries. 

As part of the Trade and Cooperation Agreement, the UK and EU have agreed to pursue common standards of support for domestic businesses in pursuit of a level-playing field. This means that the UK government should not promote UK businesses unfairly and unreasonably above EU businesses.

The majority of employment law in the UK comes from regulations set out by the EU. As a member of the EU, the rights and responsibilities of employees and employers were largely consistent across all EU countries, facilitating the employment of individuals in other EU countries. In 2021, at the end of the Brexit transition period, UK employment law may begin to diverge from EU employment law. This could present new challenges to businesses that employ EU nationals in the UK or UK nationals in the EU. 

Employing EU nationals in the UK

Businesses that currently employ EU, EEA or Swiss nationals in the UK should inform these employees that they will need to apply to the EU Settlement Scheme for settled status before 30 June 2021. Without this, the employees may no longer be eligible to live and work in the UK, which could disrupt your business and cost you valuable staff members. EU nationals seeking settled status must satisfy certain eligibility criteria. 

Businesses that intend to employ EU nationals to come to the UK for work after 31 December 2020 will need to take into consideration the UK’s post-Brexit immigration system. After the transition period ends, a points-based immigration system will begin, setting certain requirements for foreign workers to enter the country for employment. The potential employee should:

• have a job offer from an approved employer sponsor

• for a position that requires at least A level (or equivalent) qualifications

• speak English

• be paid at least £25,600

Your business will need to register for a sponsor licence from the UK government in order to support foreign workers in satisfying these requirements. You should also check that the foreign worker has the right to work in the UK using the government’s Employer Checking Service online.

There is also a UK government Global Talent Scheme to fast-track immigration for highly-skilled scientists and researchers to enter the UK without a job offer. This scheme will continue to apply to EU, EEA and Swiss citizens after Brexit takes place. Individuals hired through the Global Talent Scheme will not require a business sponsor. 

Please note, none of the above applies to Irish citizens, whose current rights to live and work in the UK will not be affected by Brexit. 

Employing UK nationals in the EU

Leaving the EU means that UK nationals no longer benefit from the Free Movement of People from 2021 onwards. Therefore, EU businesses that employ UK nationals in EU member states will need to take into account new immigration rules in the relevant jurisdiction of their place of work. This may include applying for a work permit or visa, and may take time to obtain. UK staff working in the EU that drive as part of their job may need to apply for an International Driving Permit. 

For further information on immigration issues, please see our guide on Brexit for individuals. 

Remote working from another country

Where an employee is based in an EU member state, and they will be working remotely from that member state for a UK company, there are important legal issues to consider. 

An employee working remotely in an EU member state will be under the jurisdiction of that country’s employment law. This means that the UK company must abide by the employee’s local laws on national minimum pay, annual holiday entitlements and statutory procedures on termination with regard to the remote worker. 

Remote working across borders will also raise tax issues, as it is unclear whether the employee's income tax should be paid to the UK or their home country. You should check on the government website whether the UK has a double taxation agreement to prevent employees having to pay tax in both jurisdictions. 

There is also a risk that an employee who works from home in a different member state to that of the employer and who has authority to legally bind the employer could be judged as holding a ‘permanent establishment’ in the member state in which they reside. In this case, the employer may be liable for corporation tax in the employee’s home country on the profits that are attributable to that employee’s business activity. 

If you are concerned about the implications of Brexit on your employees, you may wish to amend the terms of their employment contract to account for Brexit-related disruption. 

Force majeure is a specific clause that is often included in a commercial contract. It refers to situations where an agreement cannot be performed (eg the obligation to provide payment) because of circumstances outside the control of the parties. Where these circumstances arise, and prevent the contractual obligations from being fulfilled, the contract is temporarily suspended and can even be terminated if the circumstances do not change. 

The majority of force majeure clauses set out the specific circumstances in which the clause will operate, known as ‘Force Majeure Events.’ Provisions often cover natural disasters like hurricanes, floods, earthquakes, and weather disturbances sometimes referred to as ‘acts of God.’ Other covered events may include war, terrorism or threats of terrorism, civil disorder, labor strikes or disruptions, fire, disease or medical epidemics or outbreaks.

Since Brexit does not fall into any of the standard Force Majeure Events listed above, it is important for businesses to specifically refer to Brexit-related disruption when drafting a force majeure clause. If Brexit is not mentioned, it is unlikely that a business can rely on their force majeure clause to suspend their contractual obligations.