No deal Brexit?

The UK and the EU have been negotiating for the past number of months in advance of the UK leaving the EU next March in the hope of reaching an exit deal that is satisfactory to both sides. Various proposals have been put on the table and certain elements have been agreed. But there are still some unsolved issues, not least the issue of avoiding a hard border on the island of Ireland. The EU has repeatedly said that nothing is agreed until everything is agreed and the UK has said that “no deal for Britain is better than a bad deal for Britain”. So what happens if agreement is not reached on the Irish border and the UK crash out of the EU without a deal?

If no deal is reached between the UK and the EU, essentially all of the current rules and regulations could in theory fall into the abyss. Free trade between the EU and the UK would no longer be possible and trade would operate under World Trade Organisation (WTO) rules where tariffs and border checks would become a reality. Remember these? We covered them in the June edition of tax.point. Delays from border checks will inevitably mean long queues at ports which may not have the capacity to hold truck and other vehicles. These bottlenecks could result in shortages in certain foods or other components which will disrupt the supply chains of many manufacturers. Currently all foodstuffs, medicines, safety of mechanical parts among a host of other things are regulated by very strict EU standards. If no deal is reached, the UK would need to implement their own standards. How long could this take and would these standards be acceptable to the EU? In addition, EU citizens living in the UK and UK citizens living in the EU could have their permission to live and work removed.

A transition period

A transition period, which would mean that all current rules stay the same until December 2020, has been discussed. This period would allow more time for the UK and EU to agree the finer details of the future trade relationship between them. However this grace period can only be introduced if a deal is reached between the UK and EU. So a no deal Brexit means no transition period and the UK will leave the EU in March 2019.

What would work?

The border on the island of Ireland is the major sticking point in the negotiations. Neither side want a hard border but both have rejected each other’s proposals. The EU wants, at the very least, for Northern Ireland to remain within a customs union with the EU but this proposal has been rejected by the UK. The UK wants a type of facilitated customs arrangement which would see the UK operate customs on behalf of the EU in certain circumstances. The EU is not happy with this proposal. The easiest solution would be for the UK to remain within the Single Market where rules would essentially stay the same. But they have been very clear that they want to leave the Single Market.

More information

As noted above, Chartered Accountants Ireland and The Institute of Chartered Accountants of England and Wales have released a joint publication entitled Taking the Lead: Chartered Accountants & Brexit which gives practical details of how traders could cope with the new trading landscape that will come with a no deal scenario. Download your free copy on https://www.charteredaccountants.ie.