Hubbcat: Clear communications on customs supported firm’s growth

Being able to turn to its Local Enterprise Office for help with customs training has been of enormous benefit to Wicklow technology company Hubbcat.

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Simon Smith (CFO Hubbcat)

As well as looking to develop export sales, the communications equipment company imports kit from –

and through – the UK. Indeed, the business had an international aspect to it even before it was founded, in late 2019. That’s because the team behind it spent many years working together in the Caribbean, in the telecoms sector. Chief Financial Officer Simon Smith met friends and co-founders Alan Bates and Damian Blackburn while he was on a consulting assignment in the Bahamas.

“Alan, who is from Greystones in Co. Wicklow, always wanted to come back to Ireland to start a business,” explains Simon.

The founders had spotted a gap in the market for ‘push to talk’ (PTT) communications solutions. It allows for devices that combine walkie talkie technology with mobile phones, a better value alternative that allows people to talk instantly via the Internet.

Whether there are 10 or 100 people who need to communicate instantly, PTT can facilitate that. It works regardless of whether they are in different parts of a factory, or different parts of the globe.

Hubbcat’s first office was over a mechanic’s workshop near Greystones, Co. Wicklow. It wasn’t ideal. “We’d have to run downstairs and ask the guys if they could stop working while we pitched for business,” he laughs.

Despite the challenges this posed, one of its first wins was a major one – to supply a Covid-19 solution to

the Government of the Bahamas. Hubbcat’s solution allows visitors to the country to be monitored as they quarantine, with app-based geofencing that emits an alarm if a person quarantining breaks the rules.

The wider applications for PTT technology are simply enormous, he points out. “It’s a one size fits all communications system for workforces. They can use it as an app that sits on top of their mobile phones or via a custom device, which we supply too,” he explains.

Among its most compelling use cases are hospitality and events management, where large numbers of staff often need to keep in constant contact in a cost effective and reliable manner.

Because of the pandemic however the founders have focused first on facilities management, helping personnel to keep one another safe as they move around large and possibly empty buildings. Hubbcat can provide security and peace of mind with a ‘man down’ alert that combines a panic button with geolocation.

Local Enterprise Office the first step for exports – and imports

One of the founders’ first ports of call when setting up the business was Local Enterprise Office Wicklow which provided it with a Priming Grant, a Trading Online Voucher and mentoring.

As Hubbcat grew it moved into a local enterprise park – away from noisy car repairs – and expanded its customer base by moving into sectors such as pharmaceutical manufacturing and international food retail.

It doesn’t just export its solutions overseas, it also imports equipment, including PTT devices, from a range of countries. This includes items that are either sourced from the UK or sourced elsewhere, but which travel through the UK to get here.

It’s for that reason that Simon signed up for the Local Enterprise Office’s Prepare Your Business for Customs workshop which, because of Covid, took place online, in three two-hour sessions. “We are pitching for business in Northern Ireland and the UK so we needed to understand how new customs arrangements post-Brexit would impact on that,” he says.

The company is currently focusing on selling to facilities management companies in Ireland which are major international businesses, such as Brinks, Bidvest Noonan and Mitie.

“These are global operators. If we can grow our customer base here in Ireland with some of these global companies, we can get recommendations from them to help us grow internationally. To do that, we need to know about customs,” he explains.

The Prepare your Business for Customs programme answered all his questions. “It was really good, really detailed and the expert trainer who gave the workshop was really insightful. There are an awful lot of rules and regulations involved but the workshop helped me to get to grips with them, both in terms of software and of bringing in physical goods.”

Although Hubbcat already has experience exporting to the Bahamas, “UK and EU customs are completely different,” he points out. “The workshop explained about duty and International Commercial Terms (INCOTERMS) and outlined some of the risks and things to look out for, as well as where to go for help.”

It was highly interactive, he says, so that all participants were able to find the specific answers to questions they had about their own business.

“It’s good to know too that, in the Local Enterprise Office, I have a support network, somewhere I can go to if I’ve queries in the future.”

Use the Brexit Readiness Checker to review your firm’s preparedness 

VRAI: Finding opportunities for growth in Brexit times

It’s often been said that successful businesses look for the opportunities in every situation – but undoubtedly the challenges thrown up in 2020 have tested this theory to the max.

Niall Campion & Pat O’Connor

 

Irish company VRAI, which provides data-driven virtual reality training for “risky, remote & rare” industries, decided to face the challenges head-on, and subsequently discovered that both Covid-19 and Brexit gave them the opportunity to advance their business plans and grow.

“When Covid hit, the general advice was to hunker down, but we had a different idea, and that was to look at the opportunities and how our technologies could help the situation,” explains co-founder Pat O’Connor. “Our opportunity was in training. Zoom is great for a meeting or a workshop but try training someone for an offshore wind turbine through Zoom – it’s not going to work. We found that when we went to market for investment, there seems to be an understanding that there isn’t a platform out there to enable remote training in the same way that there is a platform available for remote meetings and calls. So Covid has brought forward those market opportunities for us.”

Brexit also brought its challenges, as it has for every business, but for VRAI, it was a no-brainer to mitigate the risk and set up a UK office, which opened in Gateshead in October 2020. “The UK market is very important for us – it’s so close to us geographically, but it’s also one of the largest economies in the world,” says Pat. “A lot of the big companies that we would deal with would have large offices in the UK.

“Specifically, we chose the Northeast for many reasons. 5,000 computer science students are graduating every year, the National Innovation Centre for Data is located in Newcastle, which ties into VRAI data focus. The Port of Tyne is the base for the Dogger Bank, currently the biggest offshore wind farm in the world.. And finally, we are based in the Proto Centre in Gateshead, which is described as the first immersive technology hub in the UK. The decision to open an office there became a no-brainer.”

Accelerating plans

“Imagine your first day working on an offshore wind turbine 100km from the coast of Scotland, waves as big as your house and the turbine the size of the Eiffel Tower – it’s very difficult to prepare for that scenario properly without some sort of simulation training.”

The features being developed for their HEAT VR training platform came from the company’s experience in dealing with large companies such as the IAG in Heathrow Airport, the United Nations in Somalia, and other Fortune 500 companies. “We learnt that there was a need for an underlying technology platform that enables simulation training,” says Pat. “There are three main parts to the platform – there’s the front end, where you can create training profiles for your employees, then the middle part, which is the simulation training in VR, and finally the back end, the data analytics and insights. We found that VR is an incredible medium for collecting data, as we’re producing about 100,000 data points per minute in terms of who you are, where you are and what you’re doing in the virtual world. We’re now adding biometric sensors, so you can also measure how you’re feeling. We can then analyse this data to improve performance and safety, and personalise training for individuals.”

One of the industries targeted by the company as ideal for their technology is the offshore wind sector. This feeds nicely into the company’s decision to open an office in Gateshead (as the UK is No.1 in the world for offshore wind, particularly in Scotland and the Northeast of England) – as well as their commitment to the “triple bottom line”.

“The triple bottom line means you focus not just on profit but also on your people and the planet,” explains Pat. “For instance, regarding people, we are committed to a gender-balanced workforce. We are trying to do something about it by committing to a gender-balanced shortlist for every job and sponsored Ireland’s first-ever female-only tech apprenticeship.

“On the planet side, we made a decision to look into how we can use our technologies to help the offshore wind industry grow, as this is definitely a ‘risky, remote and rare’ activity, but it also aligns very much with our desire to creating a sustainable business.”

Enterprise Ireland, which established an Offshore Wind Cluster in 2019, proved invaluable to VRAI when moving into the offshore wind industry. We are a part of HPSU with Enterprise Ireland,” explains Pat. “However, they’ve also been really great at helping us understand the market and make those introductions that are so valuable. It’s been a really symbiotic and useful relationship.”

 

New UK importing rules: Establishing a UK Presence

A recent Enterprise Ireland webinar outlined the key rules around customs that will come into effect when the Brexit transition period ends and discussed issues around establishing a UK presence. 

 

On 1 January 2021, the free movement of goods between the UK and Member States of the EU ends and the UK will become a ‘third country’.

Margaret Whitby, Head of Stakeholder Engagement at BPDG and Claire Wilson, Stakeholder Engagement at HMRC Customs and Borders Unit gave an overview of how the import/export rules will change.

“If you currently move goods to or from GB or EU, you only need an invoice and a transport order. After the end of the transition period the process will start with an export declaration and when you arrive at the ports in Great Britain you’ll need to have import declarations. So you will have up to nine additional procedures to take into account, depending on your role in the supply chain. These rules will come into play no matter what agreement is reached,” explained Whitby.

 

Staged introduction

Recognising the impact of coronavirus on businesses’ ability to prepare, the UK Government has decided to introduce the new border controls in three stages up until 1 July 2021 for UK imports.

“Most traders will not have to make import customs declarations on 1 January 2021 but those importing controlled goods (such as excise goods) will be expected to follow full customs requirements,” said Whitby. ​

“The requirement for safety and security declarations on import – Entry summary Declarations (ENS) will also be waived for six months.”

On 1 January 2021 the UK will join the Common Transit Convention (CTC) in its own right which allows duty to be suspended when moving goods across CTC member countries. EU goods arriving in the UK under transit will need to complete Office of Transit formalities.

“We intend to use a digital model to automate this process, making early use of the Goods Movement Vehicle System, which will support the Pre-Lodgement model for both imports and exports from July 2021,” said Wilson.

On 1 April 2021 the UK will phase in additional import documentation for animal products and on 1 July 21 it will implement full customs requirements and border checks.

 

General requirements and preparation

A UK importer and exporter will need to have an Economic Operators Registration and Identification (EORI) number (goods not services) issued by the UK and EU importers and exporters must have an EORI number issued by an EU Member State.

“You also need to agree terms and conditions with your UK importer and ensure that responsibility for customs checks, duties, verification and release regimes is clear,” said Whitby.

Since the announcement of the EU-UK Trade and Cooperation Agreement (TCA), there will be no quotas or tariffs applied on trade between the EU and the UK.

 

Declaration requirements from January 2021 to July 2021

Claire Wilson gave details about declaration requirements for imports and exports.

“Traders bringing goods from the EU to the UK will need to declare their goods to customs. Goods must be declared in advance of crossing if moving through a listed Ro-Ro port or a location without existing systems.

“Traders moving non-controlled goods to the UK will be allowed to declare their goods by making an entry into their own records. They will be required to submit this information via a supplementary declaration within six months of import and pay the duty via an approved duty deferment account at that point,” explained Wilson.

Traders moving controlled goods will need to make a frontier declaration. If the goods are coming in through a location without systems that would allow the trader to notify HMRC that goods have been imported, the trader must manually arrive the declaration in HMRC systems (including entry to the Excise Movement and Control System for excise duty suspended goods) by the end of the working day following the physical crossing.

The UK is moving to full customs control for exports from 1 January so traders exporting goods from the UK into the EU will need to submit export declarations and safety and security information.

If goods are moving via a non-inventory linked location the customs declaration will need to be submitted as “arrived” while the goods are at the trader’s premises. HMRC will notify the trader if the goods have “permission to progress” or need to be taken to a facility for a check.​ If goods are moving through a location with existing inventory systems the standard Rest of World export model will be followed.

From 1 July everything moves to Rest of World procedures.

“We’re working now with border locations to develop how they will manage goods moving through. Some will use the temporary storage model, or the newly developed Pre-lodgement model, some will use the new IT system called the Goods Vehicle Movement Service to support the Pre-lodgement model for both imports and exports and to facilitate Transit movements,” said Wilson.

 

VAT and Excise

The UK Government announced that from 1 January 2021 postponed VAT accounting will be available to UK VAT registered businesses (including Non Established Taxable Persons) for imports of goods from all countries.

On 1 January 2021, the Rest of World rules will apply to imports and exports of excise goods moving between the UK and the EU.  Businesses will need to complete customs import and export declarations using the relevant codes for duty paid or suspended goods. If businesses move duty suspended excise goods to and from a tax warehouse to the place they enter and exit the UK they must use the UK version of Excise Movement and Control System (UK EMCS). UK EMCS must also be used to move duty suspended excise goods from UK warehouse to UK warehouse.

 

Setting up a UK entity

In the second half of the webinar Gerry Collins, Managing Partner, and Ruth Potter, Tax Partner, at Ecovis, a company which is highly experienced in working with businesses internationally, spoke about creating a UK presence.

 

Importing into the UK as a non-UK business

“Goods moving from the EU into the UK will be regarded as imports and will be subject to import VAT,” explained Potter.

“Where the UK customer is unwilling to be the importer of record, the Irish supplier will be responsible and may have to register for UK VAT. A non-UK business can register as a Non-Established Taxable Persons Unit with HMRC; they don’t need a UK physical presence. But they will require a UK EORI number.”

Businesses will need to be established in the UK in order to act as a declarant for customs declarations. If the business doesn’t want to have a presence it will have to appoint a UK-based customs intermediary to deal with customs documentation. Alternatively a non-UK trader without a UK establishment can appoint a full UK agent who will act as the principal and take full responsibility for necessary customs entries, reporting and payment.

 

Creating a UK presence

“You may want to establish a UK presence simply to act as the customs agent for the Irish business. This would involve minimum cost. Or you might want a presence that can receive goods into the UK for onward supply to your customers, enter into commercial contracts with UK customers and employ staff,” said Potter.

She also explained that non-UK businesses can set up UK bank accounts, but added that the anti money laundering policies can be cumbersome and fees may be higher. Some banks insist on a UK legal entity and HMRC will not issue direct VAT repayments to businesses overseas.

Gerry Collins then outlined the issues involved in setting up a legal entity in the UK looking at the options of a UK branch, a separate limited company or a partnership, in terms of time to set up, legal protection, accounting filing, taxation and commercial issues.

“Setting up a separate entity sends a very strong message of market intent and so is good if you’re thinking of expanding. In my 30+ years of experience about 95% of businesses wanting to do this set up a limited company, normally a 100% owned subsidiary. The 5% who set up a partnership are generally in the financial services sector.”

To conclude, Ecovis outlined some key actions that businesses should be taking now given the short timescale to the end of the transition period. These include talking to customs intermediaries, checking likely commodity codes and VAT rates in the UK, appointing a VAT agent to deal with VAT compliance and performing a Brexit risk assessment.

Ecovis has offered Enterprise Ireland clients a free one-hour consultation for specific company enquiries.

Time to get ready for customs declarations

By Giles O’Neill, Brexit Unit Manager, Enterprise Ireland.

 

Regardless of the outcome of the current negotiations on a Brexit deal, our trading relationship with the UK will change fundamentally and irrevocably on January 1st. While the Brexit process may have been plagued with uncertainty up until now, the only absolute certainty in relation to the trading relationship is that exporting goods to or importing goods from the UK (excluding Northern Ireland) will require a customs declaration from January 1st 2021.

That will present a massive challenge for Irish businesses. To put its scale in context, nearly 100,000 Irish businesses trade with the UK at the moment. At present, Irish businesses generate around 1.7 million customs declarations annually, but that will rise to 20 million next year as a result of Brexit.

Goods won’t move without a declaration. There are around 60 points of data in a customs declaration and these are connected to various aspects of the shipment right down to the pallet. If you get one piece of data wrong, then everything slows down or stops.

 

While some elements of the customs declaration process will be automated, the new situation will generate a requirement for an additional 2,000 trained people in the area.

The government has put in place a new €20 million Ready for Customs fund managed by Enterprise Ireland to assist Irish businesses to meet this challenge.

The Ready for Customs fund provides grants of up to €9,000 for each new full-time employee engaged in customs work. Businesses which employ a new person to deal with customs on a part-time basis can get a grant of up to €4,500. The grants can be used for recruitment costs, employee costs and the provision of IT infrastructure.

The urgency of the situation cannot be overemphasised. If someone told you that you are not going to be able to do business with your customers in the same way, that it’s going to be more difficult to deliver to them, more costly, and definitely not as easy as it used to be, you’d be concerned. If someone told you that it was going to happen in about 100 days’ time, you’d be very worried indeed.

It is quite understandable that people have become distracted by the minutiae of the Brexit negotiations and the noise surrounding them. It is even more understandable if they have spent most of their energies dealing with Covid-19 for the past eight months.

But that doesn’t remove the stark reality that the United Kingdom will become a third country as far as trade with the EU is concerned from January 1st 2021. And no trade deal, however all-encompassing and liberal, will remove the need for customs declarations.

Of course, many companies use third party logistics providers or freight forwarders to look after customs declarations on their behalf, but they should not rely on that situation continuing beyond January.

Companies need to reach out to those partners and ask them if they have the capacity and the resources to continue to do the customs declarations in 2021. The very last thing businesses want to see is shipments stuck at ports in January because logistics and freight forwarding partners have been overwhelmed by the sheer volume of extra work created by Brexit.

Businesses who wish to avoid such a situation or want to ensure they can continue to provide customs services to clients should apply now for the Ready for Customs grant.

Brexit clock ticking fast for Irish firms to get VAT-ready

If a week is a long time in politics, then a year is an absolute eternity in the politics of Brexit.

 

Last year, we outlined the VAT implications of Britain’s looming departure from the EU. Already complicated, the picture has since become even cloudier as the UK’s Internal Market Bill pushes for a new law that would change post-Brexit customs and trade rules in Northern Ireland. Things are far from resolved, and one Brexit issue which could impact businesses in Ireland is VAT. For the many Irish firms that rely on the UK/NI markets for goods; VAT will be extremely complex with significant challenges in terms of cashflow, administrative burden, and overall competitiveness.

“The first thing to say is that the proposal to change the Northern Ireland VAT regime under the Ireland / NI Protocol to the Withdrawal Agreement will probably make it the most complicated in Europe,” says Cróna Clohisey, Public Policy Lead with Chartered Accountants Ireland.

“Under the Protocol, Northern Ireland will follow most EU VAT rules in relation to goods but this is not the case with services,” she says. “There are potential headaches in store for Irish companies exporting to, and especially importing from, the UK, and you must start getting on top of the rules now.

Come the first of January 2021, the UK will effectively operate three different VAT regimes. These include VAT rules for goods in Northern Ireland, which will continue to reflect the current position under EU law. For the rest of the UK (Britain excluding Northern Ireland), there will be a different VAT regime for goods. And finally, the UK will have a separate set of VAT rules for services.

No postponement on VAT payments

“If you’re an Irish firm trading with Britain, that’s where the biggest change is going to happen as you’re now going to be dealing in imports and exports rather than intra-community supplies,” says Cróna Clohisey. “For many businesses, this will be the first time they’ve had to deal with the rules for imports and exports.”

“The main issue will be for Irish companies importing goods from Britain,” she says. “From next year, you will be responsible for the import VAT and that will have to be paid immediately on import, whereas pre-Brexit any VAT arising could be dealt with later in your tax return.”

“If you’re adding 21% to goods worth €100,000, that’s an additional €21,000 you have to come up with that you may not have had to come up with before,” Clohisey adds to illustrate the point. “You will be able to claim it back later, but you could be waiting as long as 10 weeks before you’re able to recoup it in your next VAT return if you don’t have a deferred payment arrangement with Revenue.

“Although the UK Government has announced that it will postpone import VAT regardless of the Brexit outcome, the Irish Government has said it will only postpone import VAT on goods traded with Britain in the event of a no-deal Brexit,” she says.

“Irish importers will be able to account for the VAT later, as they currently do on goods from the UK.  If an agreement is reached between the EU and UK, VAT on imports from Britain could cause significant cashflow issues,” Clohisey says. “This is probably one of the biggest challenges that Irish firms will have to deal with in terms of importing goods from Britain, particularly those who don’t have a deferred payment account with Revenue.”

Registering for UK VAT

Another unforeseen issue coming down the tracks is the potential need to register for VAT in the UK. Up to now, many businesses were happily trading within the EU, so Irish firms did not necessarily need to register for VAT in the UK – that is about to change. “Situations will arise in 2021 where you will need to register for UK VAT, or where it will be more appropriate to do so,” says Cróna Clohisey.

“The problem with VAT registration is that it can take a long time,” she says. “Remember, you’re dealing with a new trading regime and HMRC (UK tax authority) won’t just hand out these registrations to anyone, they need to check it’s a legitimate business and that can take weeks.

“If you wait until January [to register], it could be March or April before you get your VAT registration,” Clohisey warns. “I’d be doing it now, don’t wait.”

While the ‘carving-out’ of Northern Ireland continues to make political headlines, it’s clear that there are customs and VAT-related ripples that will have a profound effect on Irish companies dealing with the UK.

Act now

“Now is the time to prepare,” says Cróna Clohisey. “Many Irish firms, especially the smaller guys, will need assistance and advice to understand the new UK/NI trading regime and how it affects them. There are some good supports out there including revenue.ie or, as a first port of call, you should talk to your accountant or financial controller.”