Post Brexit: New trade rules

With the end of the transition period nearing, businesses need to consider the new rules that will come into force from 1 January 2021 in relation to trade with EU countries.

From 1 January 2021, there will be changes in the way indirect taxes are accounted for when importing into the UK. New processes for administering imports and exports will be implemented and taxpayers may need to obtain additional information about their goods for crossing the UK border, and they may require the services of a customs agent.

Imports

From 1 January 2021, purchases of goods from EU suppliers will be regarded as imports. The process for importing goods from the EU will change. Businesses in the UK will need to complete the following actions to continue importing from EU countries from 1 January 2021:

a. How to declare goods – A customs declaration will need to be made when importing goods from the EU. These rules currently apply to importing goods from the rest of the world, including Switzerland, Norway, Iceland and Liechtenstein. This declaration can be made by the business or the business could engage someone else such as a courier, freight forwarder or customs agent to do it on its behalf.

b. EORI Number – An EORI number will be required to import goods from 1 January 2021.

c. Check the rate of tax and duty – Businesses will need to pay import VAT and Customs duty, if applicable, on all imports.

Import VAT

From 1 January 2021, UK VAT registered businesses will be able to account for import VAT on its VAT Return for goods imported from anywhere in the world. This means businesses will be able to declare and recover import VAT on the same VAT Return, rather than having to pay it upfront and recover it later which is a huge cash flow saving. Businesses do not need to be authorised to account for import VAT on its VAT Return and can automatically start using this procedure from 1 January 2021. This is the case if: + the goods imported are for a business use; + the business’ EORI number, which starts ‘GB’ is used on the customs declaration; and + the business’ VAT registration number is included on the customs declaration, where needed. Businesses will therefore be able to use this way of accounting for import VAT moving forward from 1 January 2021, which will assist with cashflow.

How to complete your VAT return

Due to postponed VAT accounting, there will be changes to the way VAT returns are completed. An online monthly statement will be available to download and keep for business records. It will show the total import VAT postponed for the previous month which businesses should include in the VAT Return. The boxes on the VAT Return will be as follows:

Box 1Include the VAT due in this period
on imports accounted for through
postponed VAT accounting
Box 4Include the VAT reclaimed in this period
on imports accounted for through
postponed VAT accounting
Box 7Include the total value of all imports of
goods included on the online monthly
statement, excluding any VAT

Customs Duty

The UK’s new Global Tariff will replace the EU’s Common External Tariff on 1 January 2021 at the end of the Transition Period. The new tariff is tailored to the needs of the UK economy supporting the economy by making it easier and cheaper for businesses to import goods from overseas. HMRC state that it is a simpler, easier to use and lower tariff regime than the EU’s Common External Tariff (EU CET). Therefore, after 1 January 2021, when any purchases of goods from outside the UK will be classified as imports, they will be liable to duty calculated based on the UK Global Tariff rate. Customs Duty is not recoverable so any applicable duty would be an additional cost to any UK business. To use the UK Global Tariff, you need either the commodity code or description of the product. The UK Global Tariff can be found using this link.

If you consider your business will be impacted by the updated rules for importing goods to the UK, please get in touch and the VAT team can ensure your business is fully equipped for the new rules from 1 January 2021.