Brexit update: What does the Draft Withdrawal Agreement mean for business?


Susie Walker

Susie Walker

Partner & Head of Tax

20 November 2018


The UK Government recently published a draft agreement on the withdrawal of the UK from the EU. What does this agreement mean and what are the key points businesses should be aware of?

Overall, the Agreement details proposed arrangements for a transition period but provides no certainty for what such an Agreement would finally determine as the end positio­­n. The transition period shall start when the Withdrawal Agreement comes into force at 11pm on 29 March 2019 and ends on 31 December 2020. However, the UK and the EU have the option to extend this transition period, for an undefined time, as long as they both agree to do so by 1 July 2020.

Some key features of the Agreement

Law

  • It is likely that Union law will apply in the UK during the transition period, but the UK will be able to take steps to prepare and establish new international arrangements of its own.
  • The Court of Justice of the EU shall continue to have jurisdiction brought by or against the UK before the end of the transition period.
  • VAT and Excise will have status quo applied in transition period.
  • Intellectual Property (IP) rights – the holder of any EU IP rights registered or granted before the end of the transition period shall, without any re-examination, become the holder of similar rights in the UK.
  • Protection of personal data – Union law on the protection of personal data shall apply in the UK in respect of the processing of personal data of data subjects outside the UK, provided the personal data was processed under Union law in the UK before the end of transition period, or processed in the UK after the end of the transition period on the basis of this agreement.

People

  • Union citizens and family members can exercise their right to reside in the UK before the end of the transition period.
  • UK citizens can exercise right to reside in a member state before end of transition period.
  • Union citizens and UK nationals, plus family, who reside in a host state, shall have the right to leave it and enter it with a valid passport or national identity card.
  • Union citizens and UK nationals and their respective family members, who have resided legally in the host state for a continuous period of five years shall have the right to reside permanently in the host state. Once acquired, the right of permanent residence shall be lost only through absence from the host state for a period exceeding five years.
  • If, before the end of the transition period, the period of residence is less than five years, individuals shall have the right to reside permanently once they have completed the necessary periods of residence.
  • New residence status applications may be required, this may be in digital form. Deadline for such applications shall not be less than six months from the end of the transition period for people residing in the host state before the end of the transition period. For those commencing residence after the end of the transition period, the deadline will be the later of three months after their arrival, or six months from end of the transition period. Should administrative or technical problems ensue, there is an automatic one-year extension.
  • Similar rights of workers and those with professional qualifications will apply as per current rules.

Goods

Goods lawfully placed on the market in the Union or the UK before the end of the transition period may continue to freely circulate between these two markets until the goods reach their end users, except for the movement of:

  • Live animal and germinal products
  • Animal products

State aid / EIB

  • In respect of aid granted before the end of the transition period, for a period of four years after the end of the transition period, the European Commission shall be competent to initiate new administrative procedures on State Aid concerning the UK.
  • As from 30 March 2019 neither the UK nor projects based in the UK, shall be eligible for new financial operations from the EIB Group that are reserved for Member States.

Fishing

  • As regards fixing of fishing opportunities within the transition period, the UK will be consulted on fishing opportunities relating to the UK, this includes the preparation of relevant international consultations and negotiations.

Ireland / NI

  • Provision is made for a Protocol. The Union and the UK shall use their best endeavours to conclude by 31 December 2020, an agreement which supersedes this Protocol.
  • This is the “backstop” and takes the form of a temporary Customs Union encompassing the whole of UK with the Union.
  • The Protocol provides for a single customs territory between the Union and the UK. Customs duties on imports and exports and any charges having equivalent effect, shall be prohibited between the parts of the single customs territory. Under no circumstances may the UK apply to its customs territory a customs tariff which is lower than the Common Customs Tariff for any goods or imports from any 3rd country, nor apply or grant to its customs territory tariff preferences to any goods on the basis of rules of origin that are different from those governing the granting of such preferences to the same goods by the Union in its customs territory. The rules will apply in respect of all trade in goods between the single customs territory and third countries, as well as within it. The exception is for fishery and aquaculture products unless an agreement on access to waters and fishing opportunities is applicable between the Union and the UK.

Start preparing now

As negotiations on the agreement continue, we would advise all businesses, not just those directly involved in importing and exporting throughout Europe, to carry out a Brexit health check to prepare their business for change. 

Visit our Brexit Hub to download your copy of our Brexit Planning tool and for further useful insight on what Brexit could mean for you and your business.