Brexit Deal
Last update: 4th January 2021
BREXIT DEAL – THE KEY FACTS
What great news to end a very tough year – the UK finally has a Free Trade Deal with the EU!
UK businesses have craved this certainty and, despite going down to the wire, to have tariff and quota free trading conditions is surely the best possible outcome for both UK and European businesses engaged in cross-channel trade.
In Time has been monitoring the situation throughout, and our Brexit working group has been labouring hard to ensure that we are ready to meet the challenges involved in handling your shipping to and from the European Union. Our aim is to provide you with clear and straightforward guidance on what is needed to minimise any disruption to your business.
Below we aim to summarise the key points of the Trade and Cooperation Agreement (TCA) that was signed into law on New Year’s Eve:
- Under a Free Trade agreement Customs Duty tariffs will be reduced to 0% for goods originating in the UK and EU where the rules of origin requirements are satisfied.
- The rules of origin will be critical to the tariff free movement of goods. Unlike a Customs Union, a free trade deal is a bilateral agreement which only allows tariff free movement of goods which are produced in either the UK or EU. There are rules relating to this status being determined by the percentage of UK or EU content of a product. For goods manufactured in the UK/EU they must meet the rules of origin laid out in the TCA.
- Exporters meeting the origin rules will need to obtain a preference certificate to ensure that 0% tariffs apply. (See our section below about Approved Exporter Status and certificates.)
- Combining Inward Processing Relief and preferential origin treatment isn’t allowed. Care must be taken to plan and understand the complexities surrounding these important regimes.
- AEO status will be mutually recognised by the EU and UK.
- Import and Export procedures are still in place. This was always going to be the case and involves a big shift in paperwork and processes for those business who have previously only been involved with Intra-EU trade. (See our Practical Guide below.)
- The UK will move to a system of Postponed VAT Accounting (PVA), meaning that import VAT can be both declared and reclaimed on the same VAT return, thus ensuring that withdrawal does not impact negatively on cashflow.
- HMRC has introduced bank guarantee waivers for UK businesses looking to open deferment accounts. And due to the introduction of PVA, you may be able to reduce any existing bank guarantee. (Where you are solely importing 0% Duty goods under the FTA and using PVA your deferment account may not be required going forwards.)
- Anti-dumping duty (ADD) measures that were initiated by the EU have been reviewed by a newly created UK Department (Trade Remedies Investigations Directorate (TRID)) to determine if ADD is still required from 2021. It is therefore important that, for those companies who are currently subjected to ADD on imports, the .gov website (https://www.gov.uk/guidance/trade-remediestransition-policy) should be checked to confirm if those measures will continue.
- As part of the TCA, goods currently in the EU can, under certain circumstances, be re-imported without payment of customs duties. Returned Goods Relief must be used for these movements.
- VAT registration requirements in the country of import, when you sell under DDP Incoterms, remain.
- Trading in the EU requires UK businesses to appoint an Indirect Customs Representative. This is because the UK is a non-EU country. If you have not done so already, please complete the form authorising us to act as your Indirect Customs Representative.
- VAT registrations for UK businesses in the EU require that a fiscal representative is appointed in the majority of EU countries.
- E-commerce rules come in at the same time as Brexit. Low Value Consignment Relief is scrapped and any E-commerce seller or online platform previously importing under these rules is required to register for VAT and account for UK VAT at the time of supply. (This applies when the supply is £135 or below.)
- Northern Ireland will continue to trade as currently with the EU and, uniquely, effectively remains part of the customs Union.
- The rules relating to shipping between Northern Ireland and the rest of the UK are complex, and it remains unclear if movements of goods to Northern Ireland from other parts of the UK will need to be declared via the Trader Support Service. We will provide regular updates on this as the rules are established and implemented.
APPROVED EXPORTER STATUS
To ensure your EU customers can claim the reduced duty rate, a certificate or declaration of origin (EUR1 form) may be required. Application for Approved Exporter Status may therefore be beneficial, especially for companies shipping large volumes of UK origin goods to the EU. This will reduce administrative costs and burden, as pre-authenticated forms may be issued by HMRC or a simple invoice declaration used instead.
POSTPONED VAT ACCOUNTING
This is a significant change and affects all imports, not just those from the European Union. Effective immediately, there will be no requirement for VAT-registered companies to pay import VAT on any goods at the time of import. Instead, import VAT can be both declared and reclaimed on the same VAT return, so import VAT only becomes payable when the goods are sold on to the end customer.
It is important that you instruct your customs agent to declare the goods to PVA at the time of import, otherwise you will be charged import VAT and have to claim this back on your next VAT return.
Once you have PVA in place you will be able to download your PVA monthly statements via your Government Gateway account. Import VAT is declared in Boxes 1 & 4 on your VAT return and the net value of the import in Box 7.
For comprehensive information regarding the PVA scheme, please see the government’s policy paper outlining the full details.
EU VAT REGISTRATION
A common misconception is that a business is obliged to set up a subsidiary or a new entity to be able to trade goods in the EU. This is generally not the case, unless there are reasons such as CE markings or REACH regulations to satisfy.
TRADING WITH THE EU – A PRACTICAL GUIDE
CUSTOMS DECLARATIONS
Customs declarations are now required for all shipments moving between Great Britain and the European Union, and shippers are therefore required to provide a Commercial or Pro-forma Invoice for all consignments. Invoices should always contain the following information:
- The shipper’s EORI number
- The consignee’s EORI number (wherever possible)
- An accurate description of the goods
- The commercial value of the goods
- The HS code of each product covered
- The shipper’s address and contact details
- The full address and contact details of the consignee
- The reason for export – e.g. final sale or for an exhibition or trade show
- The Incoterms under which the goods are being supplied
- The country of origin of the goods
- The name and signature of an authorised officer of the shipper
Customs declarations are not currently required for consignments moving between Northern Ireland and the EU, and no invoice is therefore required.
For customers sending goods between Great Britain and Northern Ireland we are still unclear as to the exact requirements that will apply both during the three month “temporary approach” period and thereafter from 1st April 2021. We will publish further updates specific to this trade lane as and when details are available from HMRC and, in the meantime, will continue to operate as currently, treating consignments as domestic movements.
It is the shipper’s responsibility to supply the correct HS code for the goods and we recommend that they refer to the customs Online Trade Tariff to assist them with classification if needed.
Please use the following declaration on your commercial or pro-forma invoices where consignments meet the “rules of origin” requirements as set out in the Import Duty and VAT section below:
The exporter of the products covered by this document (Exporter Ref: ……………………… <insert your EORI number>) declares that, except where otherwise indicated, these goods are of ……………………… <insert country of origin – e.g. United Kingdom> preferential origin.
IMPORT DUTY AND VAT
Although the TCA means that there will be no duty payable on most goods, a customs declaration must still be made for both import and export consignments, and import VAT will still be levied and must be accounted for in the country of destination.
DEALING WITH IMPORT DUTY
The zero-tariff, meaning zero customs duties, only relates to goods that fulfil the “rules of origin” requirements, full details of which can be found here. In summary, however, this means that most goods produced or assembled in either the UK or the EU will not be subject to import duty at destination. It is solely the shipper’s responsibility to confirm whether or not a consignment is eligible for preferential tariff duty under the new regulations.
DEALING WITH IMPORT VAT IN THE UK
Changes to UK VAT regulations have also been introduced and apply to shipments being imported into the UK from any country worldwide, full details of which can be found here. The most significant elements of these changes, however, are as follows:
- Import VAT will no longer be levied on goods valued at less that £135. (Instead, supply VAT will be due on these consignments and it is up to importers to familiarise themselves with accounting practices for this change.)
- Low Value Consignment Relief, which relieves import VAT on consignments of goods valued at £15 or less, has been abolished.
- VAT-registered companies will no longer be required to pay import VAT at the time of import. Instead, they will be able to use postponed VAT accounting to account for import VAT. This means that they will be able to declare and recover import VAT on the same VAT return rather than having to pay it at the time of importing and recover it later.
Importers in the European Union should familiarise themselves with local and European regulations when accounting for VAT on goods imported from the United Kingdom.
ADDITIONAL CUSTOMS CONSIDERATIONS
Country-specific restrictions may additionally apply to certain categories of goods, and it is the responsibility of the shipper/consignee to familiarise themselves with the rules and to ensure that consignments meet any required standards and have, where appropriate, the relevant licences.
NEXT STEPS
So, what does this mean in practical terms for the business that you do with In Time Worldwide Express?
First and foremost, please ensure that you always supply us with either a commercial or pro-forma invoice for all consignments originating either within the EU or in Great Britain – without this we will not be able to ship your goods!
If you plan to do your own export entries for air, road or ocean export shipments departing the United Kingdom, it is important that you send us a copy of your declaration as soon as possible after making the booking.
If you would like us to complete export entries on your behalf, please complete and return the letter of authorisation, printed on your company letterhead, which authorises us to complete customs entries on your behalf.
OUR CHARGES
For all time critical, air, road and short sea services, we will always include the cost of any customs formalities within our quotation to you and will advise you what these are.
Where you have contract rates in place for regular air export lanes, we will charge our standard NES Export Entry charge of £15.00 per consignment (up to three tariff headings). This will now also apply to shipments to the EU.
For air import shipments, our standard Import Customs Clearance Charge of £45.00 per consignment (up to three tariff headings) will now also apply to shipments originating within the EU. Our standard EU Processing Fee of £25.00 will no longer apply.
For any shipments that we move with other carriers (such as Integrators like DHL, UPS or FedEx) on your behalf, we will pass on any surcharges at cost. These are currently advised to be as follows for UK export shipments:
| DHL Express | £0.25/kg (Min. £4.50 per consignment) |
| UPS | £4.50 per consignment |
| FedEx | TBC |
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