A recent survey by the British Chambers of Commerce (BCC) reveals a concerning lack of preparation among UK small and medium-sized enterprises (SMEs) for ongoing EU regulations and tax changes.
A staggering 80 per cent of SMEs surveyed are unaware of the reporting requirements for the EU’s new Green Tax, which took effect on 1 October 2023.
Known as the Carbon Border Adjustment Mechanism (CBAM), this tax requires companies to report on carbon emissions related to certain imported goods, such as steel, aluminium, fertilisers, cement, electricity, iron, steel and hydrogen. Businesses will need to purchase certificates to demonstrate they have paid an amount of tax corresponding to the emissions in their supply chain and production processes.
The mechanism began a trial phase on 1 October 2023. In this transitional period, no levies will be charged, but businesses are still required to record and report on the embedded greenhouse gas emissions produced by their production processes. Full implementation is set to take place from 1 January 2026.
Navigating the complexities of VAT changes
Another notable change is in the EU’s value-added tax (VAT) regime, which will come into force in January 2025.
Changes to EU VAT rules will require businesses to pay VAT in the customer’s residing country, even for electronically provided services.
For example, if you offer online cooking classes to EU customers, you will be required to pay VAT in the customer’s country starting from January 2025.
The importance of product quality marks
The BCC survey also found that 43 per cent of UK manufacturers are unaware of the UK’s development of an alternative product quality mark to replace the EU’s.
This lack of awareness could lead to additional bureaucratic hurdles for UK exporters.
Given these impending changes, businesses must review their EU import footprint and assess the compliance and organisational impact on their trade.
The divergence in regulations and taxes between the UK and the EU post-Brexit undoubtedly creates additional complexities for UK businesses looking to trade overseas.
Therefore, it’s imperative to stay informed and prepare for changes in advance to mitigate their impact on your operations.
Government’s role in supporting businesses
The Department for Business and Trade has stated that it is working on tailoring regulations to benefit UK businesses post-Brexit.
However, businesses need to take proactive steps to understand and adapt to these new regulatory landscapes.
This includes discussing potential import/export/overseas trading issues with your accountant who can help you develop a firm strategy going forward.