Welcome to the French Duncan Brexit Hub, where we aim to provide you with a summary of the information which many businesses need to know in order to plan and work through the weeks and months ahead.
Whilst the below is by no means exhaustive, we hope it is helpful. We could have written pages on this topic, covered the different impacts on various different sectors, and completely buried you in details from HMRC – but instead we’ve tried to highlight the key issues, themes or areas which we think are the most critical, and a then given a few links for each topic which provide further detail.
Should you have any questions or queries, or if you need further advice on how your business can best manage through Brexit, our team are ready & willing to help! You can contact us at any time using this web form, and we’ll ensure the most appropriate colleague gets back to you. Alternatively you can call us directly on 0141 221 2984.
1. Importing & Exporting:
2. Human Resources:
PLEASE NOTE: The grant scheme to fund employee training and IT improvements for customs intermediaries, traders and hauliers is nearing full allocation of funds - find out more in our blog (published 5 January 2021).
With effect from 1 January 2021 all UK-based businesses sending goods to the EU will have to complete a UK customs export declaration. This must contain all the relevant information about the goods being removed from the UK including the seller’s UK EORI number, the commodity code and the value of the goods as this will be required to support the import declaration of the goods upon their arrive in the EU. Export documentation must be obtained within 3 months of the goods leaving the UK to support the zero rated sale of the goods. Most business will need to appoint an intermediary, such as a customs agent, to help make their export declarations as HMRC’s customs systems are complex. However access to customs intermediaries may now be harder to obtain as demand is high so close to the end of the transition period.
On arrival in the EU the goods will be subject to customs duty and import VAT. If the seller is also acting as the importer of the goods in the EU, they will need to apply for an EU EORI number, so will require to be VAT registered in the country of arrival. If a UK business intends to sell goods in the EU and move items across EU county borders, it will need to register for VAT in all affected countries and may need to appoint a fiscal representative in each case, unless the business has a fixed establishment in the EU which will enable it to continue to trade in the EU on the same terms as it currently does.
The end of the Brexit transitional period on 31 December 2020 will see the UK leave the EU Single Market and Customs Union. As result, and with effect from 1 January 2021, goods arriving from the EU will be classed as third country imports into the UK. Therefore, goods will need to be declared to UK customs, with import duty and import VAT generally needing to be paid or secured at the time of import. These arrangements are something that UK importers of goods from non-EU countries might be familiar with, although might be new to UK businesses which import or source goods from only the EU. However, there will be a welcome change to the way import VAT can be accounted for under the new postponed import VAT accounting rules.
One of the main changes will be the cost of importing. Import duty is usually a percentage applied to the customs value (the CIF value) based on the cost of the goods and insurance plus freight costs. The import duty percentage depends on the commodity code and the territory from which the goods are imported from. HMRC has created a UK tariff tool which allows businesses to check what the existing and likely import duty rate will be on the imported goods (link below). Import duty is usually an absolute cost to a business unless there is duty relief available, or where it can benefit from a customs regime
Import VAT is then applied at the appropriate rate (usually 20%) on top of the customs value and calculated duty. Import VAT is reclaimable as input tax on the VAT return under the normal VAT recovery rules. As noted above, postponed VAT accounting will be available for many traders with effect from 1 January 2021. This will apply to imports of goods from both EU and non-EU countries. Instead of paying VAT at import and reclaiming later, it can be self-accounted for on the appropriate VAT return. This should provide a significant cashflow benefit when compared to existing import VAT procedures. We understand that monthly C79 certificates will still be issued by HMRC detailing the import VAT entries and should be retained as evidence of incurring import VAT.
Businesses will need to ensure they have made suitable arrangements for customs clearance before the goods reach the UK frontier. This could involve appointing a customs agent or shipping agent to help to try and minimise disruption. Regular importers may consider managing their own import declarations by signing up to HMRC’s electronic customs declaration service. Businesses should ensure they have obtained their UK EORI and provided this to the person who will make the declaration to customs.
It is difficult to mention every eventuality, although here is a summary of some of the main factors to consider:
From 1 January 2021, businesses registered for VAT in the UK will be able to account for import VAT on their VAT returns for goods imported into Great Britain (England, Scotland and Wales) from anywhere outside the UK; and in Northern Ireland from outside the UK and EU.
There is no need to obtain approval to account for import VAT on your VAT Return, nor is it mandatory, except in cases where, between 1 January and 30 June 2021, you will use a simplified Customs declaration, recording the details in your own records; or have decided to delay your Customs declaration.
However, you must ensure that you make your import agent or broker aware that you intend to use PVA prior to importing goods, as it needs to be pro-actively requested on all import declarations made on your behalf. This ensures that only duty needs to be paid on arrival or posted to your deferment account. Import VAT is then accounted for via your VAT return, for the period which covers the date of import. The corresponding input tax claim is supported via receipt of an online statement, which can be accessed in the first half of each month (following import).
PLEASE NOTE HOWEVER - Import VAT statements will only be available to access for 6 months following the date they are first published, so it is CRITICAL that you download and keep a copy of each statement in your VAT accounting records, otherwise HMRC may disallow claims to input tax where none have been retained.
To register for access to the digital statement service, you’ll need your Government Gateway user ID and password which is linked to your EORI number. A link to the portal to register can be found here:
Businesses that do not utilise PVA when importing goods should still receive a paper copy C79 as normal.
The VAT rules are changing on 1 January 2021 for both sellers of overseas goods sold to customers in Great Britain (GB), and for non-UK sellers of goods located in Great Britain. This is likely to be of particular interest to both EU and non-EU based traders who sell goods to UK customers. The new VAT accounting rules largely depend on the intrinsic value of the consignment coming into GB.
Where the value of the consignment is above £135, then the ‘normal’ customs and import VAT rules will apply. This means that the goods will need to be declared to customs, with import duty and import VAT being due on the customs value of the consignment. These actions are the responsibility of the importer – normally the end customer.
Therefore, overseas businesses will need to consider how this may impact on their business model and the logistical challenges associated with this. For instance, if overseas business wish to import stock into the UK and they don’t have a UK presence then they would need to appoint a customs agent on an indirect representative basis – something that wasn’t previously required for EU based traders.
On the other hand, where the intrinsic value of the goods is below £135 then there will be significant changes to the VAT accounting treatment and will depend on the location of the goods at the time of sale and whether or not they are sold via an Online Market Place (OMP). These changes can be summarised as follows:
It is therefore recommended that overseas traders and sellers of overseas goods carefully consider these changes and how it will affect their UK VAT profile. This could involve a requirement to register for VAT, or indeed the option of VAT deregistration.
Authorised Economic Operator (AEO) status is an internationally recognised quality mark that shows your business’s role in the international supply chain is secure and has customs control procedures that meet UK and EU standards.
In light of the fact that it is effectively a quality and assurance guarantee, the application process is rigorous and, where a business is considering applying for AEO status, a suitable lead in time should be factored in as it can take a number of months for applications to receive approval.
An import VAT certificate, or C79, is the official evidence required to support input tax recovery in relation to imported goods. How a business received the C79 depends on how the customs declaration has been made by the business, or its customs agent. Generally, certificates are received the month following importation.
Call off stock is essentially stocks of goods owned by a supplier in one member state, which is sent to another member state for the benefit of a customer, but, rather than all the stock being purchased by the customer at once, they only purchase items from stock as and when they need it. Changes implemented with effect from 1 January 2020 simplified the rules across the EU and enabled suppliers to hold call off stock in another member state, without the need to register for VAT there. VAT is only due to be accounted for when goods are called-off by the customer, at which point the sale is treated as an intra-EU sale.
Prior to 31 December 2020 all call-off stock held in other EU member states by UK businesses will either need to be returned to the UK under the current rules for inter-EU movement of goods or the UK business risks having to account for import duty and VAT on the goods if moved back to the UK from 1 January 2021 onwards. Alternatively, VAT registration in the EU country where the goods are held will be required.
What is a Customs Warehouse?
These are basically places where you can store goods you have imported from the EU or elsewhere in bulk, so that they ONLY become liable to duty and VAT when you remove them for use. This can be a useful way for businesses to manage cash flow in relation to imported stock or component parts etc., without the need to pay duty and VAT until you actual need them. There are, of course, complex rules & regulations around Customs Warehousing – but more details can be found by clicking here.
What is a Customers Intermediary?
A customs intermediary is a third party who helps businesses to import or export their goods, by preparing and submitting the necessary customs paperwork to HMRC. Intermediaries include customs brokers, freight forwarders and express parcel operators.
What is a Customs Guarantee?
A customs guarantee is a financial agreement to cover customs debt that has either already arisen or will arise due to the use of a customs special procedure. In the past, a guarantee was always required when a business applied for a Duty Deferment account.
Post Brexit the requirement to have a customs guarantee may be removed in respect of certain customs transactions, but will still be required for full authorisation to put goods into customs special procedures such as inward processing, temporary admission, or end use or when a business applies to operate a temporary storage facility or customs warehouse.
As we stated above, if you've any other questions or queries, need some help or even if there are other topics you'd like us to cover in this Brexit Hub, please simply let us know using this web form, and we’ll get back to you. Alternatively you can call us directly on 0141 221 2984.
The Impact of Brexit for Employers: The human resources perspective