Once again, the UK is poised to topple out of the European Union without a deal or transition period for exiting the Customs and VAT regimes under Brexit.
Unless there is a third Brexit delay, or a Withdrawal Agreement with a transition period signed, then at 11pm on the 31 October a whole raft of new trading and indirect tax rules will apply. This includes the imposition of tariff duties, customs declarations and import VAT on goods crossing UK and EU borders for the first time.
Below is a checklist on some of the most essential measures to help mitigate the chief customs and VAT risks. There are many more considerations to think about, from licencing to customer and supplier contracts. But these basic steps will help you get through the chaos of the initial few weeks of Brexit.
- Get UK and EU EORI numbers: UK importers will need an Economic Operators Registration Identification (EORI) number for clearance of goods into UK ports. HMRC is auto-enrolling UK companies. But EU businesses importing into the UK will need to apply to HMRC. UK businesses importing into the EU, will need an EU EORI. You can apply for one from any member state.
- What duties and VAT will you pay?: It’s important to understand what customs duties and import VAT you will have to pay at UK or EU borders. HMRC’s Trade Tariff Tool can do this for you, providing commodity codes for your goods, as well as calculating UK duties and VAT. For goods going to the EU, the WTO MFN rates will apply. There are online tools for this, and your freight forwarder can help.
- Filling in customs declarations: You will have to complete customs declarations for goods crossing UK and EU borders. To help you there is off-the-shelf software, government training or you can use your freight forwarder.
- Simplify UK imports and deferring tax payments: If you are importing into the UK, HMRC’s new Transitional Simplified Procedures scheme will significantly reduce paperwork customs delays. There are lots of other arrangements, including deferring customs clearance, paying duties or VAT.
- Paying import VAT: 20% UK import VAT will be due on goods arriving from the EU. You can avoid cash payments via HMRC’s new ‘postponed accounting’. EU import VAT will be due on goods coming from the UK – many EU states will expect immediate settlement of this. The UK VAT return will change; postponed VAT will have to be declared in Boxes 2 and 4 of the VAT return. Ensure your accounting system is reconfigured for this.
- Foreign VAT registrations: UK business with a foreign VAT return will need a fiscal representative in 19 of the EU states.
- Selling goods under the distance selling thresholds: UK e-commerce merchants selling goods to EU consumers under their UK VAT number and the distance selling threshold will have to foreign VAT register to continue selling. Avalara can help you with this.
- Importing goods under £135: If you are importing parcels under £135 for sale to UK consumers, you will have to register for the new HMRC parcel scheme.
- Selling e-services to EU consumers: UK sellers of electronic consumers to EU consumers will have to register for ‘MOSS’ single return in any EU state to file and pay VAT.
- VAT reclaims: UK businesses will no longer be able to use the electronic VAT recovery portal to recover EU VAT. It’s important therefore to complete last claims before Brexit. The same for EU businesses with UK reclaims.