brexit concept with eu and uk flags


With the start of the new year, the UK has also entered a new phase when it comes to business and trade. The UK is now completely out of the EU and considered a third country, which means businesses must make changes to ensure the flow of people, goods, data, and more, between them and the EU.

So, in this article, we’re taking a look at what Brexit means for the self-employed now that a UK/EU agreement has been drafted, as we like to stay on top of the latest developments as contractor accountants.

What Does the UK/EU Deal Entail?

Now that the transition period is over and we’re operating under new rules, it’s crucial that contractors and freelancers know all they can about the deal. The most obvious thing is that the post-Brexit agreement is currently leaving businesses with more barriers to trade than they had while in the EU.

There have been some issues at the border since 1 January 2021, with lorry drivers and business owners facing new rules and legislation. This has led to heavy delays and to the UK border customs system reaching its limit, among other problems.

There appears to be both positive and negative takeaways from the deal. The agreement is fairly complicated and long at over 1,200 pages, but some of its key points that may impact the self-employed include:

  • There’ll be no tariffs on goods moving between the UK and EU or limits on how much can be traded, which is good news for many businesses. However, there are new customs procedures to follow, which are causing confusion at the border.

  • UK businesses must certify the origin of their products to quality for tariff-free trade.

  • Hauliers can move between the UK and EU without the need for European Conference of Ministers of Transport permits.

  • You can continue transporting goods by plane without restrictions – the only difference is that UK airlines can’t fly between two places in the EU.

  • A deal on energy supply is included in the agreement, which is important because the UK imports 8% of power from the continent.

  • Brexit won’t affect how most UK companies report information to Companies House, but some EU organisations will no longer be able to register in the UK.

  • While the UK no longer has to comply with EU data protection regulation, things will stay the same for, at least, four months (if the UK doesn’t change the rules).

We’ve already spoken about Brexit’s impact on self-employment, so check out our article or get in touch if you want to learn more or need help with tax rules and legislation.

Check Your Website Domain

We were already going through a digital revolution, with most businesses needing a digital presence, even if just a website or social media. However, with the pandemic and consequent lockdowns, an online presence is now essential. However, because of Brexit, it’s important that you check whether you can still continue using your domain.

This will only apply if you hold a .eu domain. You can only have one if you’re an EU/EEA citizen (or reside in the EU/EEA) and if you’re an organisation established in the EU/EEA. You will lose your .eu domain otherwise, so make sure you’re still eligible to use it. The deadline to confirm this is March 31st.

working on laptop

Self-Employed in the Services Sector

There isn’t a lot of information on the services sector, which accounted for 80% of the UK’s economy just in 2019, which means businesses providing services like banking are still uncertain about what’s going to happen.

What’s known so far is that these businesses will lose the automatic right to access EU markets and professional qualifications will no longer be automatically recognised. If you’re a locum doctor or architect, for example, you’ll have to check the rules of each EU member to ensure your qualifications are accepted.

However, not everything is negative. Both the UK and EU are looking to improve the service sector in the near future, so things may change very soon.

Brexit and the Construction Industry

There’s been a positive reception to the UK/EU deal on the part of the construction sector. This is because the agreement means no tariffs, quotas or duties, which will make life easier for the businesses who want to keep moving materials between the UK and EU.

Both have also agreed on trader schemes and cooperation in customs at the border, which is meant to reduce admin and delays. In the same vein, an agreement on the collection of VAT and debt recovery also ensures that the UK can set and control taxes as it sees fit.

James Butcher, head of policy at the National Federation of Builders and chair of the Construction Leadership Council’s Brexit working group, says that: “The UK and EU’s announcement of a trade deal will come as welcome relief, not just to the construction industry but to the global economy. The agreements reached will enable construction companies to continue to reliably forecast the cost and availability of products and materials imported from the EU or comprising components made in the EU.

“The mutual co-operation in respect of reducing technical trade barriers and co-operation at the border will also undoubtedly help to avoid some of the risks of delay and disruption. This deal delivers certainty at a time when it is needed most and represents a good day for British construction.”

When it comes to quality, EU regulations control the quality of construction materials and goods, such as the CE mark. Products with this mark will continue to move into the UK until 1 January 2022, after which the government will replace it with the UKCA, which industry experts hope will be equivalent. If so, it means there’ll be no need for additional testing and products can be mutually recognised.

Labour in a Post-Brexit Era

Things have also changed in regard to the movement of people, as there’s no more free movement between citizens of the EU and UK. This means new immigration rules and, of course, new labour legislation. EU citizens with settled status can remain in the UK, and those living in the UK before 1 January 2021 can stay until 30 June 2021 if they’ve applied for the scheme but received no answer yet.

Now, people who want to work in the UK is subject to a points-based system, designed to attract skilled workers like engineers, architects, surveyors, carpenters, and more. Because of the new rules, some companies are worried about their ability to hire workforce from the EU, as this could delay domestic projects, for example.

This is one of the main reasons why contractors will be in demand, since they are ready to hit the ground running. Contractors and sole traders can fill in any position in a company without the need for training, which saves business owners money and time. UK self-employed individuals are not subject to these new immigration rules either, so they’ll be an attractive option for many companies.

Higher Taxes for Freelancers?

Due to the pandemic and the havoc it’s been causing to the UK economy, the government seeks to repair this damage with higher taxes. In 2020, the coronavirus outbreak caused deficit to grow to around £400 billion, and a raise in income tax, for example, is expected to help fix the issue by adding approximately £200 billion a year.

We may see a hike in Capital Gains Tax as well, as the Treasury expects this to rake in over £14 billion; many are afraid this move will hinder entrepreneurship, since the tax rate on investments could double from 20% to 40% for higher rate taxpayers and from 10% to 20% for basic rate taxpayers.

Other tax raises could be on National Insurance Contributions, which would also impact the self-employed. While this issue is not strictly related to Brexit, it certainly doesn’t help to assuage worries, as many contractors and freelancers are concerned of the ‘double attack’ of the pandemic and the UK’s exit from the EU.

However, the government is also providing help through grants and schemes, which aims to assist business owners across the nation. For example, the furlough scheme has been extended until April 2021, which helped many to breathe a sigh of relief.

self employed potter

Changes to VAT

When it comes to UK/EU VAT changes, it’s not just the import and export of goods that are affected. The main change is that the EC sales list is no longer required unless the seller is based in Northern Ireland. VAT MOSS has also suffered changes, as the regular scheme is no longer available for UK clients.

Supplying Services to the EU

All supplies of digital services to consumers in EU member states are liable for VAT in the consumer’s member state. The £8,818 annual threshold for cross borders sales of digital services to EU consumers no longer applies. This means that EU VAT will be due on all supplies of digital services to EU consumers, regardless of the value of the sales.The place of supply will be where the consumer is located.

You must either:

  • Register for the Non-Union VAT MOSS scheme in an EU member state

  • Register for VAT in each EU member state where you supply digital services to consumers

Any UK clients currently on the VAT MOSS scheme can technically continue to do so; however, they must register for the “Non-Union” MOSS scheme. They must do this by the 10thof the month following a digital sale (for example, if digital sales are made in February, the registration must be completed by 10thMarch).

Importing Goods from the EU

There may be situations where businesses must pay UK VAT on goods imported from overseas. The new legislation means that products under the value of £135 will have UK VAT applied at the point of sale if the seller is based overseas, even if the goods are already in the UK.

If an online marketplace is involved in the sale of the product (for instance, Amazon), it’s their responsibility to account for VAT.

Exporting Goods to the EU

VAT-registered UK businesses continue to be able to zero-rate sales of goods to EU businesses. EU member states will treat goods entering the EU from the UK in the same ways as goods entering from other non-EU countries. This means that import VAT and any customs duties are due when the goods arrive in the EU.

Instead of the EC sales list, UK VAT-registered businesses exporting zero-rated goods to the EU have to retain evidence that the goods have left the UK.

Becoming Self-Employed

Despite everything – especially the uncertainties of Brexit and the impact Covid’s had on businesses and the economy – this is still a good time to become a contractor or sole trader. You get to make your own rules and schedule, take on the projects you like and charge how much you want. The lack of tariffs and quotas is another positive for businesses who want to trade with the EU.

Firms will still be looking to hire contractors in 2021 and, with Manchester’s reputation as the fastest-growing tech city in Europe and second only to London when it comes to tech investment, now’s also a good time to take the leap into IT contracting.

At Gorilla Accounting, we understand this can be a daunting step to take, but we’re here to help in anyway we can. Our clients get expert advice and 24/7 access to FreeAgent accounting software, not to mention an answer to their most urgent queries on the same day when they contact us before 3pm.

Find out more about how to make your business more tax-efficient by getting in touch with us on 0330 024 0406.