October 28 2020
Flying Solo: Is your business prepared for Brexit?
A few weeks ago, Flex Legal was thrilled to conduct it’s monthly Virtual GC Session in collaboration with LexisNexis and Radius Law. Speakers at this event included Iain Larkins and Sandra Martins of Radius Law, who discussed business preparations for the rapidly approaching end of the UK’s Brexit transition period. The talk covered some incredibly important topics, and was packed with information on upcoming crucial changes to UK commercial law and employment law once the transition period has ended. The session was broken up into a few hearty and information-heavy chunks which I have summarised below. To make each session a touch more digestible, each section of this post will have its key takeaways presented just below it.
0% of surveyed participants are fully prepared for Brexit
The session began with some audience polling that yielded some very interesting responses.
These polls underpinned the session fantastically. It was immediately clear that despite the transition period coming to an end in just over two months, businesses still have steps left to take to get ready. Additionally, data protection issues emerged as the foremost concern for attendees of the call, with 50% of responders stating it was their biggest Brexit challenge. These two figures, coupled with existing uncertainty about the future relationship between the UK and the EU, further highlighted the need for a session such as this.
Iain Larkins began a presentation with a quickfire breakdown of current Brexit negotiations, and pointed out that a ‘no deal’ or ‘slim deal’ is increasingly likely, and will be taking place following the 31st December 2020. This obviously presents immediate problems for UK businesses looking to prepare themselves, as the exact nature of UK / EU law still remains something of an unknown element. This is especially true in relation to our first point: data.
UK/EU Data Protection to become more complex
Iain moved onto a more thorough breakdown of data protection. Transferring data out of the UK will likely continue as normal, but transferring any data from the EEA (European Economic Area) into the UK will likely be problematic. Iain stressed the significant importance of businesses updating their privacy notices to reflect this change in status. Additionally, UK businesses that will be processing the personal data of EEA citizens will be required to have an EEA branch, office, or representative in the EEA. This is also likely to be true vice versa, and EEA businesses operating in the UK should prepare accordingly.
1) Privacy notices must be updated.
2) UK businesses processing EEA personal data will need representation in the EEA.
Expect issues with Tariffs and Delivery
Iain proceeded onto an overview of likely tariffs and delivery changes. Once again, it is important to note that until a deal is finalised or no deal is reached it will be challenging to say definitively how existing rules will change. The first thing Iain stressed is that there will likely be import and export tariffs on all goods moving in or out of the UK. If Britain leaves the EU on WTO terms, this will likely result in an immediate imposition of WTO tariffs. Some businesses may become uncompetitive overnight due to this, and should strongly consider the possibility of flexible pricing clauses and who is obliged to pay duties on goods in order to reduce the impact to their businesses.
In terms of deliveries in and out of the UK, businesses should account for delays. Additional border checks and shortages are extremely likely in any departure circumstance, and customs and logistics experts estimate a 50 - 80% risk of disruption to the trade of goods. Useful steps that can be taken now to lessen the impact of this include pre-emptive stockpiling, priority supply obligations, and whether businesses can meet any delivery obligations.
- Businesses should anticipate tariffs on imports and exports from the UK.
- Businesses should prepare for very likely disruptions to supply chains.
Intellectual Property: UK trademarks to emulate EU ones
Iain stated that IP is not likely to be massively affected by the end of the transition period, but there does remain a few crucial points to bear in mind. Firstly, in relation to European trademarks; the UK will automatically create corresponding UK trademarks to EU ones. It is also worth noting that trademark applications to the EUTM that are still ongoing following the transition date will be provided a nine-month grace period to apply for an equivalent UK trademark. Accordingly, from the 1st January 2021, UK businesses will most likely have to begin filing UK-based trademarks for registered design rights and registered community rights. As far as can be predicted, these ought to be treated the same way as EUTMs. With regards to unregistered design rights, the EU’s Unregistered Design Right (UCD) should continue to be valid for a UCD’s given protection period. There will also be corresponding and equivalent UK protection for UCDs created after the transition period.
- UK businesses in the process of applying for EUTMs should apply for the UK-based equivalent.
- These ought to be treated the same as EUTMs.
Workforce complications as Freedom of Movement ends
At this point, Sandra Martins took over to cover changes to employment law once the end of the transition period is reached. The first change she pointed to was the end of Freedom of Movement from the EU, which will obviously have significant impacts on the workforces of many UK businesses. The carrying changes around this are complex, but the most important takeaways are covered in the table featured here.
Sandra highlighted here that one very important change that some people may not have considered are changes to business travel, which are noted in the right hand column. Unfortunately, the rules here are likely to be inconsistent and will depend heavily on the country and business activity in question. Additionally, there will be limitations placed on the amount of trips that can be done in a 90 day period, so moving forwards it's crucial to check the regulations surrounding each EU country being travelled to for business.
Sandra also stressed that UK employers do have a duty to ensure employees have the right to work in the UK, and that business should audit current employers and staffing requirements from January 2021 to take stock of this. Any EU employees that have not yet done so should be encouraged to apply for settled status, and supported as much as possible in their efforts to do so.
- Freedom of Movement will be coming to an end, which will present challenges with EU staffing and business travel.
- Businesses should audit existing employees and ensure all EU staff have applied for their settled status in the UK.
Prepare to audit Social Security Contributions
Sandra then began to discuss social security contributions, and stressed that businesses will need to identify intra-EU work assignments and prepare accordingly. Any UK employers with employees working in the EU of EEA will still have to abide by the EU Social Security Coordination rules. In short, the aim here is to avoid paying multiple social security charges on the same income - so that each employee will be subject to the social security regimes of one country. As a general rule of thumb, these contributions will usually be paid in the country in which the work is done, as opposed to where the company is based.
To prepare, UK businesses should first identify any intra-EU assignments that will be taking place after 1st January 2021, then discuss the changes with affected employees. Finally, a decision will have to be reached regarding who will bear any additional charges, and where the social security contributions will have to be paid.
- Employees working in the EU will likely only have to pay social security charges in their host countries - but this should be checked.
- Employers must identify any changes to social security payments for EU employees and consult them accordingly.
Watch this space: Cross Border Pension Schemes
Finally, Sandra moved on to cross border pension schemes, which remain very much uncertain terrain. A substantial amount of EU pensions law is already incorporated into UK legislation, and the UK will continue to be subject to relevant EU laws during the transition period. The exact nature of cross border pension schemes remains to be seen - and will depend largely on any deal reached with the EU moving forwards. Once the transition period has ended, any schemes involved in cross border UK/EU activities will need to be prepared for changes that take effect from 1st January 2021. The Pensions Regulator has issued guidance on the effects of a No Deal Brexit on cross-border schemes which can be found here.
- It still is not known how UK/EU cross border pension schemes will work, and will depend heavily on any deal that might be reached between the UK and the EU.
- Businesses should anticipate the possibility of a No Deal scenario, and the impact this will have on cross border pension Schemes.
And there we have it! A bit more of an information dense GC blog post than we usually have, but this is a huge topic and we still feel as if we’re only scratching the surface. A huge thank you once again to everyone who took the time to attend or read, and Iain Larkins and Sandra Martins for providing such a thorough overview of these areas.
Please make sure you’ve signed up for the next General Counsel Virtual Event here! It will be taking place on the 11th of November, and the topic of conversation will be ‘Brexit: Survive or Thrive?’ and will build on many of the themes introduced in this talk. We hope to see you there!