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.

The UK VAT system

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.

Key points

  • INCOTERMS will be key
  • Import VAT and customs duty may arise on movements of goods into the UK
  • EU simplifications will no longer apply

Imports-VAT

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.

Action

  • Work with your UK customs agent to ensure that customs declarations are completed correctly so that PVA can be used.
  • Register for MPIVS. We can do this for you for £125.

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.

Key Points

  • Vehicles brought into the UK continue to be notifiable via the NOVA system

Imports-customs duty

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.

Recommended action

  • Review products in the UKGT to establish if goods are tariff-free
  • Review products that are subject to tariffs to establish if RoO can be satisfied and preference can be claimed
  • Calculate potential customs duty in the event preference cannot be claimed under the TCA

Imports-customs procedures

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.

Action

  • Ensure you have a GB EORI number

Phase 1 (1 January – 30 June 2021)

  • Importers will need to prepare for customs requirements. Businesses that are not established in the UK will need to appoint a UK established customs agent

          EITHER

  • Full customs declarations will be due at the border – refer to the position from 1 July 2021. This applies to all controlled goods – contact us for a list of these.

          OR

  • Businesses can defer full customs declarations for up to 6 months from the date of import. This also defers customs duty payments. Import VAT is accounted for using PVA.
  • Businesses, or their customs agents, need to be authorised to use Entry Into Declarant’s Records (EIDR) or a Simplified Declaration Process (SDP) to defer full customs declarations.
  • Businesses need a Duty Deferment Account (DDA) to defer full customs declarations. This requires a UK establishment and a UK bank account. Businesses may be able to use the DDA of their customs agents.
  • If businesses use PVA and have tariff-free goods (either because of the UKGT or claiming preference) a DDA should not be required to defer declarations.

Action

  • Establish if you are importing controlled goods
  • Ensure your customs agent is eligible and able to submit UK customs declarations
  • Determine if customs declarations can be deferred

Phase 2 (1 April 2021 onwards)

  • All products of animal origin (e.g. meat, pet food, honey, milk or egg products) and all regulated plants and plant products will require pre-notification and relevant health documentation.
  • The TCA states that the UK and the EU can set and implement their own independent sanitary and phytosanitary (SPS) rules and controls. Businesses dealing with goods that are subject to these controls will need to obtain new certification and comply with border checks.

Action

  • Determine if your products are affected

Phase 3 (1 July 2021 onwards)

  • Full customs procedures will apply to all imports.
  • Subject to any Customs Special Procedures (e.g. customs warehousing), customs duties and import VAT will be due at importation, where applicable.
  • It will be possible to operate a DDA. This means customs duty and import VAT will become payable by Direct Debit on or around the 15th day of the month following import. Note a DDA requires a UK establishment and a UK bank account. Businesses may be able to use the DDA of their customs agents.
  • It will still be possible for businesses to use PVA.
  • It will be possible to use simplified declaration procedures (SDP and EIDR) but these will only defer full customs declarations for up to 4 weeks.
  • Full Safety and Security declarations will be required.
  • For SPS goods, there will be an increase in physical checks and samples will be taken.
  • Checks for animals, plants and their products will now take place at the UK border.

Action

  • Be ready to make full customs declarations from 1 July 2021
  • Customs duties and import VAT will be due on import
  • DDA still an option from 1 July 2021
  • PVA still applies

Exports-VAT

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.

Key points

  • Sales from the UK to the EU can be zero-rated
  • Import VAT and customs duty may be due in the destination country
  • INCOTERMS will determine which party is responsible for importing goods

Exports-customs procedures

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.

Transactions taking place between Northern Ireland and Ireland

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.

How Türner & Co can help

  • Work with you and key stakeholders in your business to map out the implications of trade under the TCA
  • Identify what goods are moving to and from the UK – in particular, whether these are controlled goods
  • Advise on INCOTERMS
  • Apply for a GB EORI number
  • Advise on duty rates and RoO
  • Assist with customs deferment / DDA applications
  • Work with customs agents / freight forwarders

To set up a call to discuss the next steps, please contact Kate McDermott: kate.mcdermott@tuerner.com
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.

Want to find out more?

Speak to our team and find out how we can get you up and running for your next venture in the UK.

Contact Us
Design & Built by The Dairy Creative Agency
The Diary Creative Agency