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Ready for Brexit with S/4HANA

The UK has become a third country for the EU. All cross-border transactions between EU and GB (excluding Northern Ireland) are classified as imports and exports.

In this post, I would like to summarize the steps and checks you need to perform to make your S/4HANA or ECC system ready for Brexit. Of course, this heavily depends on if you have legal entities in the UK or do any business with the UK from an EU country.

If you have legal entities in the EU and/or GB the first things you need to do are:

  • Deactivate the EU flag for country GB.
  • Change your VAT sales conditions. Sales to the UK should be considered export tax not EC sales anymore.
  • Check changes related to Intrastat. The UK is not relevant for Intrastat anymore.
  • Northern Ireland is still part of the EU internal market. Northern Ireland will be classified as XI. VAT numbers should start with XI following the existing numeric GB VAT number.
  • For GB company codes check the newly introduced postponed accounting rules (OSS 2996657).

If your trade falls under the NI protocol:

  • Northern Ireland will follow both the EU and UK VAT systems.
  • NI Protocol is only valid for goods (not for services).
  • Update VAT numbers with prefix XI as mentioned above.
  • Update all BP master records and organizational units from NI business with the region. Region codes are provided in the OSS note I will note below.
  • Implement a bunch of OSS notes for program corrections.

Important OSS note:

  • 2885225 – BREXIT: Through the Transition Period and Beyond.
    • This is a central note about Brexit. It describes also all other notes to be implemented for the Northern Ireland protocol as well.
  • 2997204 – Intrastat declarations: End of BREXIT transition period on January 01, 2021.
    • This node makes program adjustments to the Intrastat program and also describes manual activities for Northern Ireland.
    • 2768412 – Recommendations for Brexit in FI.

Technical actions from Finance perspective explained in more detail

  • Change your company code settings and remove the EU indicator from country GB.

Update XI VAT identification numbers (for Northern Ireland) should be stored in table T001Z (parameter XIVATN). 

  • Tax codes.

Business between EU and UK is not considered intracommunity anymore. You should change your tax code determination and change it to export/import instead of intracommunity. For GB company codes, postponed accounting is introduced. For this, you likely need to create new Tax codes. Details check OSS note 2996657.

  • Payment settings

The UK will remain in the SEPA area. Official EPC statement:

https://www.europeanpaymentscouncil.eu/document-library/position-papers/epc-decision-paper-brexit-and-uk-psps-participation-sepa-schemes

However, some minor changes apply. For payments over 1000 EUR outside the EU, the payer's address must be included in the payment data. The SAP delivered CGI SEPA CT formats already include the address field. Make sure that your vendor/customer master data is complete so the SEPA payment files get populated correctly.