The UK intends to phase its new processes in over six months but the EU intends to treat the UK as a ‘third country’ from 1 January 2021 if no deal is in place. Before that date, it is important that you have conducted analysis to determine the additional customs procedures you will be required to submit and understand the import and export procedures for trading with the EU as a third country.
We have provided the headline import and export considerations below (expand to read full details):
- Companies importing into and exporting from the UK will need to obtain a European Union registration and identification (EORI) number that starts with a GB followed by your VAT number. For businesses established in the EU who also importing into and exporting from the EU will need an EU EORI number. If you do not have one, you may have increased costs and delays. You can apply for an EORI at https://www.gov.uk/eori
- Identify whether customs administration will be handled internally or by an external agent. If internally, identify whether existing IT facilities/software within your company will be sufficient to process customs declarations or whether you need to invest in new systems. These declarations are complex and require specialist knowledge to complete so if you are not confident that you have these capabilities internally, we would recommend making contact with external agents now.
- Regardless of whether or not there is a Brexit deal, you must retain proof that the goods have been physically moved to another county and this must be kept for six years.
- Where you have proof of export and goods are exported within three months, the sale of the goods is zero rated. The proof of export must show the physical movement of the goods.
- Assuming no special alternative trade arrangement exists, you will no longer be required to complete an EC Sales list.
- Intrastat declarations will still be required after Brexit
- As with exports, you must apply for an EORI number that starts with GB in order to import goods. You can apply for an EORI at https://www.gov.uk/eori
- As with export declarations, you will need to identify whether there is the necessary skillset internally to process formal import declarations or whether you need to invest in retraining existing staff or appointing an agent who will clear the goods into the UK. The customs declarations are complex and require specialist knowledge to complete, so we would recommend appointing an external agent to assist. At the time of going to press, the UK has no trade agreements in place which will have a huge impact on all businesses that buy from the EU.
- You will need to decide whether you are going to pay the import duty on arrival or set up a duty deferment account. The duty deferment account allows goods to clear into the UK seamlessly, then a payment is collected on 15th day of the following month by direct debit for the import duty due. Normally, the deferment account requires a bank guarantee which is costly, however, depending on how things work out, this may only be required for the duty element if the import taxes.
- In the event of a no deal Brexit, import duty may well apply to goods imported from the EU as well as import VAT at 20%. Import duty that is a sticking tax and cannot be reclaimed. When the goods arrive in the UK, import duty is payable to clear the goods unless you have a duty deferment account – the duty deferment accounts acts like a credit card with HMRC. The use of a deferment account will speed the clearance process up. You can set one up at gov.uk.
- Import VAT will not be payable on arrival. HMRC have introduced postponed VAT accounting for goods imported from the EU to enable businesses to account for import VAT (paying it and claiming it) in the same period. In the case of a ‘no-deal’, HMRC have confirmed that businesses will be able to use postponed VAT accounting on all imports, not just in goods brought in from the EU.
A key point to consider when preparing for Brexit is establishment. Currently, freedom of establishment applies to EU companies irrespective of the regime applied in their country of incorporation. However, following Brexit, UK companies will become third country companies for the purposes of EU law.
In the event of a 'no deal' Brexit, a UK company will therefore be unable to act as the importer of record (IOR) into the EU without an EU establishment post Brexit, and vice versa. An importer of record is the entity or individual who is responsible for all entry documents required by Customs and for the product classification and payment of duties, as well as any other import obligations.
The solution is either to create a relevant establishment or identify some form of representation in the UK/EU. This may be in the form of a direct/indirect representative or a fiscal representative. So, if exporting from the UK to the EU, you would either need to set up a registered office in the EU with the staff and technical resources necessary to file the relevant paperwork and keep relevant records (see details above), or you would need to pay an official distributor or a customs and freight forwarding agent in the EU to bear the risk that new paperwork and payment obligations are satisfied.
The alternative is to shift the responsibility of the import onto the customer (who is located in the jurisdiction where the goods are to be sent) but this may not be possible for any number of reasons (eg. an end customer has not been identified pre-shipment).
For VAT purposes, Northern Ireland will be treated as the EU from Great Britain’s perspective. The movement of goods between the Northern Ireland and Great Britain will be treated as exports/imports. There is more nuance here and we recommend any business working with goods moving in and/or out of Northern Ireland get in touch and seek further advice.
The next step
If you would like to speak to one of our dedicated VAT experts to discuss the main areas of risk and opportunity, or you would like to discuss how we can help you plan for the new border formalities, please speak to you usual UHY Hacker Young contact, get in touch with one of our experts listed below, or complete the contact form.