What does Brexit mean for NI SMEs & It’s Affect On Cross Border Business Relations.

Northern Ireland businesses have much to think about now that the UK has exited the European Union. Michael Farrell explains some changes SMEs should consider going forward.

With the transition period due to expire on 31 December 2020, the timeframe for the EU and UK to reach agreement on a free trade deal is extremely challenging. If an agreement cannot be achieved in the coming weeks, there is still the risk of a no-deal exit at the end of the year.

Regardless of whether or not a free trade agreement is reached, the Northern Ireland Protocol in the Withdrawal Agreement will avoid a hard border on the island of Ireland. Effectively, this means that while businesses in Northern Ireland will remain part of the UK customs regime, they will continue to have free access to EU markets. However, mixed signals about the customs arrangements that will be in place at the end of the transition period continue to be a cause of concern.

On one hand, the UK government has said it will legislate to guarantee unfettered access for Northern Ireland’s businesses to the whole of the UK internal market and ensure that this legislation is in force for 1 January 2021. On the other hand, Michel Barnier, the EU’s chief Brexit negotiator, has said that in agreeing to the Protocol on Northern Ireland, the UK has agreed to a system of reinforced checks and controls for goods entering Northern Ireland from Great Britain and that checks are “indispensable”.

For now, it seems prudent to plan on the basis that while the Protocol means that it should be largely business as usual for NI businesses whose only trade is within Northern Ireland, NI businesses who trade with GB are likely to face additional costs, delays and disruption due to a border in the Irish Sea. Likewise, NI businesses that import goods from GB for onward distribution or processing in the Republic of Ireland could face additional administration costs.

Irish companies with UK-based directors

It’s also important for SMEs to remember that companies that have established in the Republic of Ireland and have only UK-based directors will need to have taken appropriate steps to continue to trade legally once the transition period ends. These companies will need to either appoint an EEA-resident director or put in place a Section 137 Revenue Bond in order to comply with the Companies Act.

A third possibility may be to obtain a certificate under section 140 of the Act to get an exemption from having an EEA resident director. To obtain this, a company must make an application to Revenue for a written statement that there are reasonable grounds for Revenue to believe that the company has a real and continuous link with one or more economic activities being carried on in the State. Application for a section 140 certificate is then made to the Companies Registration Office (CRO).

There are also additional company law implications for companies, including restrictions on changing financial year-end when aligning with group companies and change of branch registrations from EEA to non-EEA. The CRO have updated its guidance on this on its website.

Duration of the transition period

While Prime Minister Johnson has said that the UK will not seek to extend the transition period, if an extension was to be agreed, it could be until 31 December 2022. The key date to be aware of in this regard is 1 July 2020, the deadline for agreeing on an extension. If there is no extension, as seems likely, the transition period will end on 31 December 2020.

Source: Michael Farrell is a Director at PKF-FPM Accountants Limited.