Get ready for trade with the EU after the Brexit transition period
17 July 2020| CATEGORIES: Brexit| TAGS: Brexit, VAT
The UK government has launched a new campaign to help businesses and individuals prepare for the end of the Brexit transition period.
It includes actions businesses and individuals need to take to be ready for the UK’s new relationship with the EU from 1 January 2021. A new checker tool is available at gov.uk/transition which identifies steps to be taken depending on the individual’s or business’ circumstances.
Help for businesses trading with the EU
New guidance has been published with information for traders on importing and exporting goods between Great Britain and the EU after 1 January 2021.
These guides detail on a step by step basis what action should be taken to ensure goods are transported and cross the border successfully.
Border Operating Model
The government has also published its Border Operating Model. This 206-page document provides technical detail on how the border with the EU will work after the transition period and the actions that traders, hauliers, ports and carriers need to take.
The UK Government will implement full border controls on imports coming into GB from the EU. These will be introduced in three stages up until 1 July 2021.
The stages are:
- From January 2021:
- Traders importing standard goods, covering everything from clothes to electronics, will need to prepare for basic customs requirements, such as keeping sufficient records of imported goods. Traders will also need to consider how they account for and pay VAT on imported goods.
- Traders will then have up to six months to complete customs declarations. While tariffs will be payable where due on relevant goods, payments can be deferred until the customs declaration has been made.
- UK Safety and Security declarations will not be required on imports for the first six months.
- Standard customs declarations will be needed from this date for controlled goods and excise goods like alcohol and tobacco products.
- There will also be physical checks at the point of destination or other approved premises on all high-risk live animals and plants, and a requirement to pre-notify for certain movements, but they will not be required to enter GB via a Border Control Post (BCP).
- Export declarations and UK exit Safety and Security declarations will be required for all goods.
- Traders importing and exporting goods using the Common Transit Convention will need to follow all of the transit procedures – these will not be introduced in stages.
- The goods vehicle movement service (GVMS) will be introduced from January only for transit movements.
- From April 2021:
- All products of animal origin (POAO) – for example meat, honey, milk or egg products – and all regulated plants and plant products will require pre-notification and the relevant health documentation.
- Any physical checks will continue to be conducted at the point of destination until July 2021.
- From July 2021:
- Traders moving any goods will have to make full customs declarations at the point of importation and pay relevant tariffs.
- Full Safety and Security declarations will be required, while for commodities subject to sanitary and phytosanitary (SPS) controls, these will have to be presented to BCPs and there will be an increase in physical checks and the taking of samples.
- SPS checks for animals, plants and their products will take place at GB Border Control Posts and not at destination.
- The GVMS will be in place for all imports, exports and transit movements at border locations which have chosen to introduce it.
Duty Deferment Account
Traders who import goods regularly may benefit from having a duty deferment account (DDA). This enables customs charges including customs duty, excise duty, and import VAT to be paid once a month through Direct Debit instead of being paid on individual consignments. VAT registered traders can choose to account for import VAT on their VAT return using postponed VAT accounting instead.
To set up a DDA, traders, or their representatives, apply for a deferment account number (DAN) and will need to be authorised by HMRC. New rules are being introduced which will allow most traders to use duty deferment without a Customs Comprehensive Guarantee (CCG).
DDAs will be required for traders making deferred declarations (standard goods) because deferring a customs declaration also means deferring the duty payable. A DDA belonging to either the trader or their agent must be in place at the point of submitting the supplementary declaration (which can be deferred up to six months from point of import).
How will import VAT be paid?
VAT will be levied on imports of goods from the EU, following the same rates and structures as are currently applied to Rest of World imports
VAT registered traders will be able to account for import VAT on their VAT return by using postponed VAT accounting from 1 January 2021. Unless they are eligible to defer their supplementary declarations, they will not be compelled to use postponed VAT accounting.
Non-VAT registered traders (and any VAT registered traders not using postponed VAT accounting) will need to report and pay import VAT through the customs processes. Within this context, VAT payments can be deferred using a Duty Deferment Account (DDA).
VAT on imports of goods in consignments not exceeding £135 in value will be treated differently to those goods in consignments exceeding £135.
Traders using deferred declarations – import VAT
VAT registered traders who are eligible to defer their supplementary declarations must use postponed VAT accounting. This means they will need to account for import VAT on their periodic (usually quarterly) VAT return which includes the date they imported the goods.
To do this they will need to estimate the import VAT due from the records of imported goods they are required to keep in their own commercial records. When they submit their deferred declaration, they must adjust this estimate to precisely account for the import VAT due on a later VAT return.
Non-VAT registered traders who choose to defer their supplementary declarations will follow the same process as they do for customs duties and will pay any import VAT due on their Duty Deferment Account.
Import VAT on consignments below £135
For imported goods in a consignment not exceeding a value of £135, excluding excise goods and gifts, import VAT will no longer be due at the border. Low value consignment relief will be withdrawn and VAT will be charged on the goods as if they were supplied in the UK and accounted to HMRC on the UK VAT return.
Businesses selling goods to be imported into the UK with a value not exceeding £135 will be required to charge and collect any VAT due at the time of sale. They will be need to register for VAT in the UK and to account for the VAT due on their VAT return.
In circumstances where businesses sell goods to be imported into the UK with a value not exceeding £135 through an online marketplace, the online marketplace will be required to register for UK VAT and to account for the VAT due on their VAT return.
UK VAT registered businesses importing goods in a consignment not exceeding £135 in value that have not been charged VAT at the time of purchase will be required to account for VAT on their VAT return under the reverse charge method.
Separate guidance on how to pay and account for VAT on non-excise goods not exceeding £135 will be published by HMRC in due course.
HMRC will continue to require that all VAT registered businesses currently required to submit monthly Intrastat arrivals declarations to carry on submitting these from 1 January 2021. This includes both businesses deferring their customs declarations and businesses providing customs declarations at the time of import.
This statistical information will still be required by the government in order to produce National Accounts, Balance of Payments and impact government policy development, evaluation and performance monitoring and decision making.
What businesses can do now to prepare
Businesses should carefully review all the information regarding the new border controls to ensure they are ready for the changes being introduced and avoid interruptions to their trade flows.
In particular businesses should:
- Ensure they have GB EORI number issued by the UK in order to move goods in and out of the UK. This can be applied for now. VAT registered businesses with EU trade were previously auto-enrolled with a GB EORI number under the government’s Brexit no-deal planning, so should check whether they already have a number before applying.
- Decide whether to use an intermediary, such as customs agent, Fast Parcel Operator (FPO), Freight Forwarder (FF) or broker, to help them complete and submit their customs declarations.
- Businesses choosing not to use an intermediary, will need to make the declarations themselves. To do this they will need to get access to HMRC systems and to purchase software.
- Consider applying for a DDA if they do not already have one.
- Be prepared to pay or account for VAT on imported goods.
Please get in touch if you require assistance with your preparations for trading with the EU from 1 January 2021.