Brexit impact on D365 & AX finance systems

That’s because the UK has now entered an 11-month period, known as the transition, that keeps the UK bound to the EU’s rules. This will affect the tax/VAT setup for all UK companies and companies trading with the UK.

During the transition period the UK will remain part of the EU’s trading arrangements – the single market and the customs union. That means no tariffs, quotas or checks will be introduced.

After this period there will be significant changes which companies need to make sure they are fully prepared for, that means not only understanding the implication but also making sure that your finance systems are prepared for this, planning for this becomes more critical the more subsidiaries there is within the organisation.

Digital Architect Group can help prepare your ERP system for these upcoming changes, as we have started monitoring the trade-agreements that’s being put into place translating these into actionable setup for MS D365/AX.

D365/AX the following areas will need to be evaluated for configuration updates and retesting, but the material impact depends on the setup in the individual organisation.

Impacted system areas

Intrastat.

For EU companies trading with the UK, the system must recognise UK as a non-EU country for Intrastat reporting.

For UK companies, HMRC has been unclear, some stating Intrastat reporting is no longer needed, and some stating Intrastat will still be required, we will keep monitoring these requirements.

VAT/TAX Groups

For EU companies, all UK customers, suppliers and projects registered against an EU VAT/TAX group will need to be changed.

Fur UK companies, changing the groups will not be necessary but the underlying accounting might have to be changed for EU trade, this is still under negotiation.

Supplier and Customer groups

Non-UK companies, A typical setup here is that UK suppliers and customers are associated with a group for the EU, all of these will have to be changed.

UK companies, typical setup is that a domestic group is used, if this is not the case then future configuration of these will need review as well.

Financial dimensions

If financial dimensions are used to segment financial reporting according to territories such as EU, non-EU, domestic then these will need further analysis and potentially need to be updated on the affected records they are associated with.

VAT/Tax Codes

For UK companies and companies trading with UK, VAT/TAX codes used on goods and services are used to determine the correct tariffs etc. applied to the import/export, these will need to be in line with the new trade agreements being negotiated by the UK government.

Other areas of consideration

The above is not an exhaustive list, but rather the main areas of concern within the standard D365/AX application. Your organisation also need to think about integrated/dependant systems, any customisations in your particular system that enhances or depends on VAT/Tax configuration

Trade agreements

UK has already started the process of negotiating trade agreements with a vast amount of non-EU countries which will take affect once the transition period is over. Currently 20 trade agreements has been agreed and signed by both member states or groups, and another 19 is being negotiated not counting the EU trade agreement.

Trade agreements that have been signed

Agreements with the following countries and trading blocs are expected to take effect when existing EU trade agreements no longer apply to the UK, following the transition period.