Brexit | VAT & Custom Charges

As if COVID-19 was not enough for businesses to deal with, the end of the Brexit transition period is rapidly approaching.

While the UK has left the European Union (EU) we are currently in a transitional period that ends on 31 December 2020. From 1 January 2021 the UK will operate a full external border and controls will be placed on the movement of goods.

The procedures for goods moving to or from the EU will be similar to those currently in place for movements between the UK and the Rest of World. Businesses currently moving goods to or from non-EU countries should be familiar with what will be required. For businesses that have only ever dealt with the EU, the changes may require more consideration and preparation.

For imports from the EU the changes will occur in three phases.

From January 2021:

• Customs declarations will be required for controlled goods (those goods that need to a license to be imported such as alcohol and tobacco)
• For other goods a declaration will also be required but there will normally be scope to defer them, and the payment of any duty, for up to six months
• Import VAT will be payable on any standard or reduced rated goods being imported into the UK from the EU

From 1 April 2021:

• Products of animal origin such as meat, pet food, milk or egg products and regulated plant products will need pre-notification to Customs and relevant health documentation

From 1 July 2021:

• Customs declarations will be needed at the point of importation for all goods

Customs Declarations for exports to the EU will also be required from 1 January 2021. Evidence to show goods meet the EU import requirements may be required if the goods are to be admitted into the EU, this could include Export Health Certificates.

This will be true regardless of the outcome of negotiations and whether the UK and the EU conclude a Free Trade Agreement (FTA). If there is no FTA, duty may be payable on goods moving between the UK and EU.

The way import VAT is accounted for by VAT-registered businesses on imports is also changing from 1 January 2021. The new system is called Postponed VAT Accounting (PVA). Rather than paying import VAT when the goods arrive and reclaiming the VAT through the VAT return, often months later, the import VAT is paid and reclaimed (subject to the normal rules) at the same time through the VAT return. PVA is compulsory where Customs Declarations are deferred but is optional for other imports. It will provide significant cash flow benefits so is worth considering.

There will be a new online system which will detail the import VAT due to be accounted for through the VAT return.

For non-VAT registered businesses who have to pay import VAT, using a Duty Deferment Account will allow them to pay any import VAT monthly rather than at the time of import. This may provide some cash flow benefits.

The Duty Deferment Account will also allow any business to pay import duty on a monthly basis rather than for each individual import.

There are some important steps to take to ensure your business is prepared for Brexit.

• Make sure you have an EORI
• Consider who will submit customs entries
• If using a freight forwarder or customs agent discuss the changes with them
• Discuss the changes with EU suppliers or customers
• Consider applying for a Duty Deferment Account

If you are concerned about the impact of the new rules that Brexit will have on your business, please contact me or your usual Albert Goodman contact to discuss this matter further.