SAP Business One & Brexit: Next Steps

The UK’s final transitional period for Brexit is now only a matter of weeks away.

Although there is still uncertainty around the conclusion of trade talks between the EU and the UK, SAP has provided an update on some of the functionality that already exists within SAP Business One that can assist you and contribute to your preparations as the transitional period comes to an end.

You must be up to date on potential impacts to your business for trading from the 1st of January 2021. You should always check with your accountants or tax advisors on their recommendations. Please note that it is not only UK organisations that will be affected by the end of the transition period; the EU and other organisations dealing with UK organisations will likewise be impacted.

Please find further information on the UK Government Transitional website for the most recent changes and rules for businesses.

SAP has been preparing for various outcomes since January 1st 2021, for some time now. It will remain closely committed to any changes and impacts that materialise. SEIDOR will continue to update and support customers as things evolve and we navigate through the new changes and requirements that arise over the coming weeks.

Earlier this year, SAP released SAP Business One Version 10 (SQL and HANA). This current major release includes a new localisation for organisations within the United Kingdom. SAP has announced that Version 10 will be the only release for official support of Brexit-related legal changes affecting the UK. SAP has developed a new Migration Utility that will allow for the future migration of databases to the newer localisation, ready for any future legal changes.

SAP expects that after 2021, the new UK localisation will be the only localisation maintained as legally compliant for the country of the United Kingdom. However, in 2021, SAP will equally maintain both UK and GB localisations legally compliant with changes affecting customers in the United Kingdom.

Updates for UK-Based Organisations

Please refer to the Government’s UK Transition website for the most up-to-date guidance on Brexit. Regardless of the final agreement, Brexit is expected to affect organisations in the UK, EU and the rest of the world who trade with each other. It is strongly advised that as soon as the outcome is known, SAP Business One users utilise or change the various functions and settings in their solution to cater for future trading scenarios. Please see the video above for further information.

As a result, there are certain features we would like to draw your attention to regarding SAP that will become effective after the end of the transition period. Transactions that are covered by the Northern Ireland protocol, which is still being defined, are excluded:

1. The EU Sales report will become obsolete after December 31st 2020
2. Intrastat declarations will become obsolete after December 31st 2020
3. EU transactions will need to be considered as import/export transactions
4. VAT returns will most likely need imports/exports to be reported like EU transactions before December 31st 2020. The final guidance on VAT returns after December 31, 2020, from the HRMC, has yet to be confirmed
5. For VAT reports that include dates before and after December 31st 2020, it is recommended that you create new VAT codes for imports/exports to be used in transactions in 2021. The VAT tax declaration boxes (and, where applicable, BAS code definitions, such as in MTD protocols) will need to incorporate these new VAT codes
6. To handle transactions with other EU countries after December 31st 2020, the correct tax codes will need to be set up in the business partner master data and used within invoices. This is to ensure that exports from the UK to EU countries are no longer treated and reported as EU cross-border goods deliveries but instead as trade with countries outside of the EU
7. You may be required to define duty groups to apply to items that are purchased in EU-27 countries to capture duties in landed costs transactions
8. If you have defined account determination based on VAT codes, you will have to review and amend this definition where applicable
9. You are recommended to process a billing run for all open deliveries (especially for EU customers) on December 31st 2020. This will avoid having to maintain correct VAT codes for future dated transactions
10. According to regulations set by the UK Government, Intrastat requirements will continue to apply for goods moving to and from Northern Ireland and the EU. This means that organisations that currently provide Intrastat declarations for these movements will continue to be required to do so in 2021. For the collection of Intrastat data, HMRC will continue to require that all VAT-registered businesses currently required to submit monthly Intrastat arrival declarations continue submitting these from January 1st 2021, to the same timelines as currently required. This will also include organisations that delay customs declarations and organisations who provide declarations at the time of import

Please note SAP Business One partially supports import declarations to release goods imported from countries outside of the EU. You can record customs duty by using the landed costs functionality. You are strongly advised to engage with your customs agents to complete Customs Declaration Forms for goods purchased from EU countries.

Updates for EU-27 Based Organisations

The situation will affect all 27 EU member countries after the end of the Transition period. Any EU-27 organisation transacting with UK organisations must consider the effect on EC Sales reports and local VAT reporting requirements, including the specifics for Northern Ireland. Sales to the UK will no longer be relevant for the EC Sales report.

All transactions with UK business partners must use a VAT code that applies to third-party countries. These transactions may also include landed costs, including customs duties.

Updates for the Rest Of World Organisations

With the end of the transition period, organisations in countries outside of the EU will also be affected, based on agreements that the UK will establish with those countries. The UK will likely need to forge new trading agreements outside the EU with each country or bloc. The World Trade Organization (WTO) terms may be used as a default, or specific terms may be agreed on.

If you are unsure how any of the above impacts your organisation and your use of SAP Business One, feel free to get in touch with your Account Manager today.