2020 & 2021 Brexit Implications for SAP Business One Customers in the United Kingdom

Dear Partners,

As part of SAP’s commitment to closely monitor the United Kingdom’s departure from the European Union (commonly referred to as “Brexit”), the transition period, and preparations for the eventual no-deal scenario, this update describes our current understanding of the impacts on SAP Business One customers in the United Kingdom and introduces the functionality available to prepare customers for the new situation.

In a referendum held in the United Kingdom on June 23, 2016, most people voted in favour of the United Kingdom of Great Britain and Northern Ireland (UK) leaving the European Union (EU). The process of separation was initiated by the UK government by invoking Article 50 of the Treaty of the European Union on March 29, 2017. The United Kingdom formally left the European Union at 11 pm GMT on January 31, 2020. Subsequently, UK entered the transition period in which EU law still applies. The end of the transition period is scheduled for 11pm GMT on December 31, 2020.

After ratification of the Withdrawal Agreement in January 2020, the deadline for agreeing the terms of the UK's future relationship with the EU is December 31, 2020. As of today, the details of the UK’s future relationship are not known as negotiations are still in progress. A no-deal scenario, also called "hard Brexit", is where the UK leaves the EU and becomes a "third-country" at 11 pm GMT on December 31, 2020, without a framework for a future relationship or a trade deal with the EU. SAP continues monitoring the situation and will respond in line with the final agreement.

This communication is to inform you about SAP Business One functionality that will help customers in the United Kingdom prepare for the situation after the end of the transition period, be it deal or no-deal Brexit.

Support for future legal changes in the UK

SAP Business One version 10.0 will be the only channel for support of Brexit related legal changes affecting the UK customers and partners as maintenance of SAP Business One Version 9.3 ended on June 30, 2020.

To better address and target UK’s specific legal changes in the future (e.g. related to VAT, reporting etc.), a new localisation called “United Kingdom of Great Britain and Northern Ireland” (UK) was released with SAP Business One 10.0 PL00 for new databases excluding the existing and renamed localization “UK International / Republic of Ireland” (GB). We expect that after 2021, the new UK localisation will be the only localisation maintained as legally compliant for the country of the United Kingdom. In 2021, we will equally maintain both UK and GB localisations legally compliant with changes affecting the customers in the United Kingdom.

The new Localization Migration Utility provides customers with a convenient way to migrate company databases from the current GB localization to the new UK localization in order to be ready for future legal changes. The migration process is an SAP Business One code procedure that is easy to execute and normally takes a few minutes. The tool is released with SAP Business One 10.0 Feature Package (FP) 2008 and will also be still available in version 10.0 FP 2105. However, it will be deactivated in version 10.0 FP 2108 and higher. This gives partners and customers 12 months from its availability to migrate affected databases. You can find more information about the localization migration utility in SAP Note 2912598.

There are also various functionalities and settings in SAP Business One that can cater for future situations after December 31, 2020. We strongly advise that you consider any changes in these settings in cooperation with your customers’ tax advisors. Please note that it is not only UK organisations that are affected by the end of the transition period; the EU and other organisations dealing with UK organisations will likewise be affected.

UK Organisations:

For a summary of the considerations for SAP Business One customers in connection with existing functionality in SAP Business One 10.0 FP 2008 please refer to SAP Note 2519116.

For more guidance about the rules after the transition period, you may want to refer to The UK transition website maintained by the UK government.  This website can help your customer’s organisation to learn about new rules and actions to be taken to prepare their business for the changes after December 31, 2020. Please note that there are several other implications which you may need to consider that are outside the scope of SAP Business One.

We would like to draw your attention to the following points related to SAP Business One 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 31, 2020.
2. Intrastat declarations will become obsolete after December 31, 2020.
3. EU transactions will need to be considered as import/export transactions.
4. VAT returns will most likely require imports/exports to be reported in the same manner as EU transactions before the end of the UK transition period. The final guidance on VAT returns after December 31, 2020 from the HRMC is yet to be disclosed.
5. For VAT reports that include dates before and after the end of the UK transition period, we recommend that you set up new VAT codes for imports/exports to be used in transactions after December 31, 2020. The VAT tax declaration boxes (and, where applicable, BAS code definitions, such as in MTD protocols) will need to incorporate the new VAT codes.
6. To correctly handle transactions with other EU countries after the end of the UK transition period, the correct tax codes need to be set up in the business partner master data and used on 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 (like for the United States).
7. You may need to define duty groups to apply to items that are purchased in EU-27 countries (the remaining 27 EU member countries) to capture duties in landed costs transactions.
8. In you have defined account determination based on VAT codes, you need to review and amend this definition where relevant.
9. We recommend that you process a billing run for all open deliveries (especially for EU customers) on December 31, 2020, to avoid having to maintain correct VAT codes for future dated transactions.
10. According to regulations set by the UK government (disclosed on site), Intrastat requirements will continue to apply for goods moving to and from Northern Ireland and the EU. Businesses 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 1, 2021, to the same timelines as currently required. This includes businesses that delay their customs declarations and businesses providing customs declarations at the time of import.

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. We strongly advise that your customers engage with customs agents to complete Customs Declaration Forms for goods purchased from EU countries.

EU-27 Organisations:

Conceivably, all remaining 27 EU member countries will be affected by the situation after the end of the Brexit transition period. Any EU-27 organisation that will be transacting with UK organisations will need to 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 will need to use a VAT code that applies to third party countries.  These transactions may also include landed costs, including customs duties.

Rest-of-the-World Organisations:

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