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Brexit: Are you ready to import or export?

Nicola Gladwell

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Nicola Gladwell

From 1 January 2021, the UK will operate a full external border with the EU, which will entail major changes for imports and exports to and from the trading bloc.

From this date, declarations will be needed to import goods or export specific (limited) goods categorised as ‘controlled’.

Here, our VAT Consultant, Nicola Gladwell discusses some of the changes and considerations importers and exporters should be aware of.

Changes will apply to all goods movements between the UK and EU, and may involve customs declarations, customs duties and VAT on imports, and safety and security declarations.

For non-controlled goods brought from the EU to the UK, import controls apply in three stages: January, April and July 2021. There will also be ‘Additional requirements’ for certain specific goods movements, such as foodstuffs.

Action points to consider now include:

Economic Operators Registration and Identification (EORI) numbers

From 1 January 2021, an EORI number with the prefix ‘GB’ is needed to move goods between the UK and the EU, unless you only move goods between Northern Ireland and Ireland.

Nicola says, “Most clients we work with will already have their GB EORI number linked to their VAT number in place as a result of previously importing goods from outside the EU or as a result of applying as part of their Brexit planning.

For businesses who move goods between the UK and Northern Ireland, they will need an EORI number that starts with XI. To get an EORI number that starts with XI, you must already have an EORI number that starts with GB, else you will need to apply for this. To save yourself time and effort, you can sign up to the Trader Support Service (TSS) before 23 November 2020 and you’ll automatically be allocated an XI EORI. Under the TSS you will need to make digital import declarations for goods moving from the UK to Northern Ireland.”

Remember that from January 2021, it will be important to think about both the UK and EU sides of the equation

To comply with EU requirements, you will, for example, need an EU EORI number and possibly VAT registrations if your business plans to import goods into the EU from the UK. Customs declarations in the member state of importation will also be required.

Postponed VAT accounting for goods imported from the EU

From 1 January 2021, import VAT applies to imports from the EU as well as from non-EU countries. Postponed accounting basically allows for import VAT to be accounted for by a UK VAT registered business through its VAT return, rather than having to pay import VAT at customs entry (including through a deferment account) and claim it back as input tax in the relevant VAT return. The use of postponed accounting is optional but given the cashflow and potential time savings, it is likely most VAT registered businesses will choose to apply postponed accounting. No authority to apply postponed accounting is required but the person completing the customs declarations will need to indicate this as the way consignee wishes to account for import VAT.

Nicola says, “The introduction of postponed accounting for import VAT effectively replaces the current arrangements for accounting for acquisition VAT on EU goods in the existing VAT returns. It will also be a change to the procedure for those businesses already importing goods into the UK.

For businesses choosing to use postponed accounting, HMRC will issue a monthly statement to indicate the imports on which import VAT needs to be accounted for in the appropriate VAT return.

From a reporting perspective, import VAT will be declared in Box 1 of the return and recovered as input tax in Box 4 subject to normal rules. The net value of goods will be declared in Box 7. As such, boxes 2, 8 and 9 which are dedicated to EU goods transactions with the UK will become redundant. Whether HMRC will amend the format of the return in the future remains to be seen but given this will require systems amendments (particularly in light of MTD), then this may not be a priority. Furthermore, EC Sales Lists will no longer be required for goods or services.

However, if a UK business currently submits Intrastat returns for Arrivals from the EU into the UK, the requirement to submit these will continue for another year. This is partly because of the 6 month customs declaration delay afforded to imports from the EU. Dispatch Intrastats for movements from the UK to the EU will no longer be required.”

Delaying customs declarations and payment of tariffs

When the UK’s full suite of border controls are in place in July 2021, full customs declarations and payment of customs duties, as set out in the new UK Global Tariff (or as specified in any trade deal with the EU) must take place when goods are imported from the EU. But from 1 January 2021 to 30 June 2021, most traders with a good compliance record can defer making full declaration for up to six months on imports of standard goods from the EU.

Nicola says, “In these circumstances, an estimate of import VAT due for the months covered by the VAT return should be entered with any necessary adjustments being made once the full declarations are submitted.”

Using a customs intermediary

Given the complexity of UK and EU customs declarations, you may want to engage a customs intermediary to deal on your behalf.

Nicola says, “We have a good relationship with such customs intermediaries and can introduce clients where this service is required.”

Online checker tool

This is only a summary outline of some of the issues involved. Gov.uk provides an online checker tool to use in your own circumstances. Do talk to us where further advice is needed.

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This information has been produced by Rouse Partners LLP for general interest. No responsibility for loss occasioned to any person acting or refraining from action as a result of this information is accepted by Rouse Partners LLP. In all cases appropriate advice should be sought before making a decision.

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