The regulatory and compliance implications of Brexit were significant and multi-layered, and directly impacted the client’s supply chain and tax operating models. Our client needed a new operational and legal structure to maintain European market access for its product portfolio, while simultaneously addressing a range of interconnected finance, tax and regulatory exposures

Indirect tax challenges

• VAT complexity across member states: Selling into multiple EU countries from a UK entity created a heavy new compliance burden – separate VAT registrations, local VAT IDs, and individual reporting requirements across member states, all of which significantly increased the resource demands on the compliance teams and therefore increased costs.
• Cross-border tax compliance: The sourcing structure of the supply chain introduced added complexity around import VAT and its recoverability, governed by the applicable trade compliance rules in each market.
• Permanent establishment risk: Operating from the UK created meaningful exposure to local corporation tax in EU countries, where the presence of employees, sales activity, or inventory operations could trigger a taxable presence.
• Transfer pricing: With the UK principle trading company distributing to local group sales entities across the EU, a robust transfer pricing policy, backed by comprehensive supporting documentation, became essential.

Supply chain challenges

• Intercompany trade route disruption: the existing intercompany settlement and netting arrangements were built around the UK entity’s central role; Brexit severed the legal and regulatory basis for those flows, requiring a fundamental rethink of the group’s intercompany finance model.

• Operational complexity outside the EU: Managing temperature-controlled goods, batch approvals, product traceability, customs paperwork, and Qualified Person (QP) duties all become considerably more difficult when the distributing entity sits outside the EU.

Regulatory challenges

• An evolving legislative framework: The EU’s ongoing changes to pharmaceutical packaging, biotech, and medical device rules require life sciences companies to continuously update their compliance plans; a process that is materially harder to manage from a UK-based entity with no direct footprint in the EEA.
• Licence validity: Key operational licences, including the Wholesale Distribution Authorisation (WDA) and Good Distribution Practice (GDP) certification, may no longer be valid for a company headquartered in the UK, putting the legal basis for EU distribution at risk.

Our client saw the regulatory challenge as an opportunity to review their operating model for EEA operations, in both the short and long-term. They needed a new model that was legally sound, tax compliant, operationally workable, and built to absorb future regulatory change.