A Trade Cooperation Agreement (TCA) has been made between the UK and the EU that governs the movement of goods.
This guide outlines the key implications for VAT and customs duty. Further guides about the movement of people, wider tax issues and specific guidance for online traders are available. Please contact us for more information.
There will be significant changes for imports of goods into the UK from the EU, and exports of goods from the UK to the EU.
The INCOTERMS in sale and purchase contracts will be key in identifying which party in the supply chain has import and export responsibilities.
A number of EU simplifications no longer apply in the UK, e.g. triangulation, the supply & installed goods simplification and the call-off stock simplification. The EU distance selling regulations also no longer apply.
Postponed VAT Accounting (PVA) will apply from 1 January 2021. Import VAT will not be payable at the border. Instead businesses can account for import VAT on UK VAT returns. This will also apply to imports from non-EU countries. This creates a potential cash flow advantage.
All businesses with a UK VAT registration number can use PVA – it does not require a business to be specifically authorised. PVA must be used when a business is deferring customs declarations (see below). In all other cases, use of PVA is optional.
Businesses using PVA need to register for the Monthly Postponed Import VAT Statements (MPIVS) system in order to download statements to support the reclaim of import VAT on UK VAT returns. Businesses do not need to register for MPIVS before using PVA.
Businesses should continue to notify HMRC about vehicles brought into the UK as they do now. The NOVA (Notification of Vehicle Arrivals) systems will continue.
Free movement of goods between the UK and EU has ended. Movements of goods into the UK are now imports.
The TCA provides for tariff-free imports when the Rules of Origin (RoO) are satisfied. The RoO determine the economic nationality of goods . The RoO are complex and businesses should be certain before self-certifying the origin of goods and claiming preference on customs declarations.
The UK Global Tariff (UKGT) has replaced the EU’s Common Customs Tariff. The UKGT contains the Most Favoured Nation (MFN) rates that will apply should a business importing goods from the EU be unable to satisfy the RoO.
It is estimated that zero rates of duty will apply to around 60+% of imports into the UK – from the EU and the rest of the world. If goods are subject to zero tariffs in the UKGT, a business does not need to claim preference under the TCA.
Businesses importing goods into the UK from the EU will be required to comply with customs procedures. From 1 January 2021, there is a 3-phase approach to managing customs procedures for imports into the UK from the EU. In all cases, businesses will require a GB EORI (Economic Operator Registration and Identification) number.
UK VAT-registered businesses can zero-rate sales to EU customers. The supplier must obtain sufficient evidence of export from the UK to support zero-rating.
UK VAT-registered businesses exporting goods (or supplying services) to EU VAT-registered customers will no longer be required to complete EC Sales Lists or Intrastat supplementary declarations.
It will be necessary to establish how exports from the UK will be managed. We recommend that affected businesses contact their their freight forwarder / logistics providers to confirm this point.
The customer may need to pay import VAT and customs duty in the destination country. Sales contracts should specify which party will be responsible for importing the goods into the destination country. This will be determined by the INCOTERMS.
Businesses must have a GB EORI number and check if goods require an export licence or certificate, e.g. for food or livestock. Controlled goods such as chemical and excise goods will require additional documentation and will have additional procedures to follow.
Businesses may need to appoint a customs agent to manage export procedures on their behalf. Businesses will need to provide the agent with all relevant information required to enable completion and submission of export declarations.
In some circumstances, pre-approval of the export will be required before the goods arrive at
port /airport. Businesses will need to factor this into suppy chain modelling.
Specific rules apply to trade between Mainland UK, Northern Ireland, and the Republic of Ireland.
Northern Ireland will have dual status and will remain a member of the EU customs union for a period of at least 4 years from 1 January 2021.
We recommend seeking specific advice if your business currently, or has plans to, trade with Northern Irish businesses.
To set up a call to discuss the next steps, please contact Kate McDermott: firstname.lastname@example.org
Disclaimer: The contents of this document are for general information only and are not a substitute for formal professional advice. Türner & Co accepts no liability for any actions taken or not taken on the basis of this document without taking formal advice from us. Information correct at 15 January 2021.