Ireland lures UK businesses as Brexit deadline nears

For the Republic of Ireland, uncertainty over Brexit and the future trade relationship with the United Kingdom is tempered with opportunity.

Although numerous questions remain for Irish businesses seeking to trade with Northern Ireland or Great Britain, the unfettered access the Republic has to European markets has made it a more attractive option for UK businesses to relocate or at least have a presence in Ireland.

In the first three quarters of 2020 new company and business registrations are up nearly 20 per cent, to 11,965.

At least some of those new registrations are Brexit-related as businesses in the UK look to secure a subsidiary, branch company or stand-alone EU registered firm.

“We’re getting inundated with calls from the UK, from businesses looking to set up a European hub and obviously Ireland and the Netherlands tend to be the two countries they consider first,” says Brendan Murphy, Tax Director with Baker Tilly Ireland.

“We saw similar demand about a year ago but none of the UK companies were at the stage at that point to move to Ireland; it was more a conversation about how they might do it and what was required.

“Now a lot of the companies have come to the point where they will do whatever they need to do to get an establishment in the EU, and if that means hiring a sales person or business development person on the ground and Dublin or wherever else, they will look at that avenue.”

The appeal of Ireland is not just its new position as the only English-speaking member of the EU. It also offers one of the lowest corporate tax rates in Europe at 12.5% and as the UK has confirmed it will stay in the Common Travel Area post Brexit, movement of people between the Republic and the UK will remain seamless.

But Murphy says Revenue Commissioners, the Irish customs and taxation agency, wants to avoid attracting shell companies with little more than a brass plate and a registration certificate from setting up in the country for VAT advantage.

“Will we have small distribution and sales centres? Quite possibly — but our government and the Revenue are looking more tightly at the substance requirements of new companies,” he says.

“Our VAT registration times have slowed down dramatically off the back of Brexit as well and it can be as much as eight weeks to get VAT registration because Revenue want to know how your business is going to operate, what kind of presence you have, even down to your actual contracts and employment agreements.”

Those who do make the grade will join approximately 225,000 other registered businesses in Ireland to be sent letters in coming weeks urging them to get ready for Great Britain’s departure from the single market and customs union, now less than 100 days away.

While the Revenue says Irish businesses responsible for 97 per cent of the value of export trade with the UK have registered for Economic Operators Registration Identification (EORI) number — it is believed small companies have not taken this critical step.

Without an EORI number businesses will not be able to trade with the UK, and more businesses will be contacted by letter and phone to remind them to sign up.

There are also those businesses who don’t see themselves as exporters and who have become used to seamless trade with Northern Ireland, moving goods and people back and forth what could be dozens of times a day.

For these Irish businesses, there may be a touch of denial, says Baker Tilly Ireland Tax Manager Neil Phair, who hails from the border county of Cavan.

“In fairness to the Irish government, they’ve been kind of telling people to get ready for years, and it is not as though people should be waking up to this at the last minute,” Mr Phair says.

“But if you are looking at companies in the border region who do a lot of cross-border trades, I think there are a lot who take it for granted they can cross.”

If the Northern Ireland Protocol (part of the Withdrawal Agreement signed in late 2019) comes into force on January 1, that border should remain permeable.

But if there is any certainty in Brexit negotiations, it is that agreements are often rewritten or disregarded, and the Internal Market Bill being debated by Westminster could scuttle those plans.

“I don’t think people in Westminster realise how often people hop across that border every day and how much trade actually goes across that border,” Mr Phair says.

“I mean, just to get to Malin in north Donegal from Dublin, for example, you have to go through the North, or to go through the Republic via Cavan and Leitrim and you would have to add nearly a hundred miles to a round trip journey.”

Ireland’s recently released Budget includes €340 million committed to Brexit-related spending next year, with much of that to support increased compliance required at ports and airports, as well as hiring of additional 500 staff for checks.

But it also included created two funds to help combat both Covid and Brexit uncertainty: a recovery fund, at €3.4 billion, and a further €2.1 billion in contingency funding.

Tánaiste Leo Varadkar gave potential tariffs on Irish farmers exporting to the UK as an example of why the support funds were needed: “If you’re a beef farmer or a food exporter, and you’re going to face 40 per cent tariffs in 72 days’ time, how do you prepare for that? They’re going to need State aid at that point, and that State aid will be forthcoming.”

The other challenge for Irish business will lie in the well-travelled path of using Great Britain as a stepping stone to Europe.

There are fears that after committing to the Common Transit Area — which allows Irish exports to pass over UK roads and out of UK ports without requiring customs checks — the UK might now renege.

And even if that transit area remains accessible, the port delays for haulage predicted post-Brexit in places like Kent could make it unviable for some Irish exporters to cross Great Britain only to be stuck in lorry queues.

“I think a lot will have to route around GB because of the time delays and they will either need to find a workaround or find somewhere in mainland Europe to go to instead,” says Murphy.

“We are going to find a lot of businesses face costs and long delays wherever they are dealing with the UK, and that things that used to be so simple will be slower and more complex.”