The EU’s goal is to reach an agreement that avoids a no-deal Brexit. The EU and the UK Government have agreed on the Withdrawal Agreement, 1but the House of Commons has not approved the agreement.
The EU and its Member States have also made preparations for a ‘no-deal’ scenario in which the UK withdraws from the EU without an agreement.
Impact of a ‘no-deal Brexit’
Steps are being taken at national and EU level to prepare for the financial services impact of a ‘no-deal Brexit’ scenario, where the United Kingdom would exit the European Union without a withdrawal agreement.
The European Commission’s Contingency Action Plan sets out temporary equivalence decisions on central counterparty services, central securities depositories and derivatives contracts and the clearing of derivatives. Through legislative measures the aim is to safeguard financial stability and secure the continuity of financial services activities in the EU. After the European Council on Brexit in March, the Commission made some changes of a technical nature to these legislative measures so that no action would be needed from the market operators and there would be no negative impact on the market because of the postponement of Brexit.
In Finland, an Act amending the Act on Investment Services entered into force on 20 March 2019. According to the Act, third-country firms can, under certain conditions, continue to provide investment services in Finland to professional clients without having to set up a branch. The firm is required to apply to the Financial Supervisory Authority for an operating licence through a fairly simple process. In the statement of reasons accompanying the legislative proposal, reference is made to the possible problems of interpretation that may arise in securing the continuity of over-the-counter derivatives contracts if an operating licence is not applied for. In such cases the Financial Supervisory Authority can issue an interpretation decision on whether or not the business activities in question require an operating licence.
Businesses in the financial services sector should make preparations for a no-deal Brexit, and should seek to identify the consequences of such a scenario for their own business.
The Commission has issued several legislative proposals, notices and press releases on Brexit preparedness.
Government proposal before Parliament (in Finnish, Parliament of Finland website)
Businesses: The UK’s exit from the EU will bring changes to cross-border trade, for example. Find out whether Brexit affects your company’s taxation and what measures or changes may be needed. Study the procedures and rules that apply to trading with non-EU countries.
Individuals: Brexit has no direct impact on individual taxpayers’ income tax.
Businesses: Brexit is a particularly significant challenge for businesses that only trade within the Single Market without borders. Businesses that are going to trade with the UK in the future will need to engage in customs clearance procedures which are mandatory in trade with third countries. The businesses have to acquaint themselves with these matters and obtain information about what trading with non-EU countries requires and what requirements third country products must meet before they can be imported to the intra-EU market.
Individuals:When you order goods online, you should be prepared that orders made from the UK will be cleared through Customs and taxed in the same way as online purchases from non-EU countries such as China or the USA.
Martti Salmi, Senior Ministerial Adviser, tel. +358 400 510 304, martti.salmi(at)vm.fi