Brexit for StartUps

February, 2020

What does Brexit mean?

The UK has ceased to be a member of the European Union, after the public voted to leave in a referendum held in June 2016. The UK had been a member of the EU for 47 years and so much of its economy, politics and laws are aligned to the EU.

The various impacts on start-ups in the near and long-term are addressed in this note.

Is the UK still a member of the EU?

No, after the 31 January 2020, we formally exited the EU.

Is the UK still bound by EU laws?

Yes, after exiting we entered into a transition period which means that we are bound by EU laws until 31 December 2020. During this period the UK and EU hope to strike a deal which will decide which (if any) EU laws the UK will agree to continue to comply with and/or remain aligned with.

If my business is VAT registered, do I still have to charge VAT?

Yes, VAT charging remains the same during the transition period.

The UK will leave the EU VAT regime on the 31 December 2020. However, the Withdrawal Agreement (which is the agreement between the UK and EU regulating the transition period) allows this to be extended by two years. The long-term future of VAT in the UK is subject to the UK and EU agreeing a free-trade deal and otherwise the UK government deciding whether to retain VAT as a tax or replace it with something else.

Is there an impact on SEIS and EIS?

No, these schemes will likely remain in place. There is no impact on the availability of these schemes to investors. It is unlikely that HMRC will take any steps to remove these schemes in the near future as they are viewed to be beneficial to the general economy.

Is my EU trademark still valid?

Yes, during the transition period the EU trademark regulations still apply in the UK. Therefore, holders of EU trademarks that have been registered before the end of the transition period will automatically be granted a comparable UK trademark.

The treatment of trademarks is likely to be a key topic in any negotiations between the UK and the EU. It is likely that either the current approach to EU trademarks will continue (i.e. they will include the UK as a designated country) or existing EU trademarks will be split into UK and EU trademarks and separate applications will need to be made in future. The UK has already announced that it which ensure that existing EU trademarks at the end of the transition period remain protected in the UK.

Will I have to pay duties when I sell goods and services to the EU?

Tariffs/duties will only apply if the UK and EU cannot reach a zero-tariff trade deal at the end of this year. In the event of a no-deal Brexit, the UK will likely default to WTO trade rules on duties.

Are EU grants still available to startups?

Many UK grant funding has traditionally been funded by the EU. Check the terms of any grant that you have been granted and to which you apply to ensure that funding is still available and that you still qualify. The UK government has agreed to underwrite some (but not all) EU grant money.

Will my visa/right to be in the U.K. be impacted?

Freedom of movement between the UK and EU will remain until the end of the transition period on 31 December 2020, after which it is anticipated that the UK will end free movement. It is still possible that freedom of movement may form part of any deal.

The UK government has announced details of its plans for an Australian-style points based immigration system which will be in place by January 2021. Applicants will be assigned points based on a number of professional and personal characteristics and EU citizens would likely not have any preferential status in these determinations. Therefore, anyone wanting to work or live in the UK long term would require a visa.

EU nationals who are living in the UK should apply to the EU Settlement Scheme for pre-settled status. EU nationals looking to move to the UK can apply for pre-settled status as long as they move to the UK before 31 December 2020.

EU nationals who have lived in the UK for more than 5 years should either apply to the EU Settlement Scheme for settled status, or for British citizenship.

Please take immigration advice specific to your circumstances. Please do not delay getting your immigration position settled as there is likely to be little flexibility for those who have not settled their status by the end of 2020.

Conclusion

During the transition period, everything from laws to procedures for start-ups will remain the same. After the end of 2020, any changes shall be dictated primarily by whether the UK and the EU reach a deal and its terms.

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