KPMG's Fionn Uibh Eachach on new tool which help businesses to identify some of the trade-related implications that will arise from Brexit.
While most of the business commentary around Brexit over the past year has been based on conjecture, given the British government’s recently stated position on leaving the single market and customs union, businesses on both sides of the Border are working to identify some of the trade-related implications that will arise from Brexit under different scenarios.
Fionn Uibh Eachach, a Tax Director with KPMG in Ireland, says,“Many of these scenarios point to the probability of the UK leaving the customs union, and businesses involved in Ireland-UK trade are now assessing the detail of what the financial impact could be.
“Unless there is a tariff-free EU/UK trade agreement, Irish goods will be subject to tariffs and the EU’s external border will run through Ireland, with a customs regime between the two jurisdictions.
“Businesses should consider identifying the impacted supply chains now and quantifying the financial consequences of potential additional customs duties, VAT and trade compliance costs.”
Colleagues across KPMG offices in Dublin, Belfast and London have been working together to develop a software tool that models the potential Brexit impact.
“It’s a powerful software innovation that helps businesses deconstruct their supply chains and identify where the costs, bottlenecks and opportunities may lie. The goal is to help a range of businesses gain an understanding of the implications, based on various Brexit scenarios,” says Uibh Eachach.
He explains, “Using VAT and Customs filing data, the software can produce a bespoke report quantifying the key customs duty and VAT impacts arising from Brexit. The tool maps the flows of goods into and out of the UK, giving visibility over the elements of the supply chain that are most exposed to additional cost or supply chain risk as a result of Brexit.
“Armed with this insight, businesses can then work to identify specific solutions to the issues raised, which could involve alternative supplier sourcing, revision of trade terms or changes to the logistics process.”
A key issue in determining the potential duty liability and mitigation strategies is the origin of a product and all of its components.
Uibh Eachach highlights Britain’s car industry as an obvious example of the tax and tariffs issues facing both the EU and UK. For example, the UK’s automotive trade body, the Society of Motor Manufacturers and Traders, suggests that of the 30,000 components in the average UK-built car, almost six in ten (59 percent) are imported and of that figure, two-thirds are imported from elsewhere in the EU.
The impact of Brexit is also exercising the minds of the business community in Northern Ireland. Brexit could dramatically change the financial impact of the physical flow of goods in and out of Northern Ireland – including the hugely critical impact on trade with the Republic.
This article was originally published in The Sunday Business Post on 30 April 2017 and is reproduced here with their kind permission.