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no deal partnership pack

Customs, excise and VAT: ‘No deal’ support pack for businesses

Elizabeth Wilson 8 November 2018 No comments

If the UK leaves the EU without a deal on 29 March 2019, there will be immediate changes for every business that trades with the EU.  UK businesses will have to apply customs, excise and VAT procedures to goods traded with the EU, in largely the same way as the current procedures for goods traded outside the EU.

New government publication

HMRC has published a partnership pack which is designed to support businesses preparing for day one if the UK leaves the EU without a deal, with more detailed guidance to follow later in the autumn.

The partnership pack provides a high-level guide to customs processes and procedures that are likely to apply in a ‘no deal’ scenario. The pack explains:

  • how trade, processes and regulations at the UK border will change after 29 March 2019.
  • what businesses operating at the UK border will need to do from 29 March 2019.

Customs, excise and VAT procedures after 29 March

The changes to customs, excise and VAT procedures, in a ‘no deal’ scenario, are detailed in the government’s previously published technical notices.

The key changes have been highlighted in the partnership pack and are outlined below.

Changes to customs

Businesses can currently move goods freely between EU member states.  This means that UK businesses trading with the rest of the EU do not have to make any customs import or export declarations.

The key changes from 11pm on 29th March 2019 include:

  • The free movement of goods between the UK and EU member states will end.
  • An export declaration will be required on the new Customs Declaration Service (CDS) system when goods leave the UK. (The export declaration includes a safety and security declaration).
  • An import declaration will be required on CDS when goods enter the UK.
  • A separate safety and security declaration will be required by the carrier of the goods on imports into the UK (e.g. by the haulier, airline, freight train operator).

Changes to excise

Excise duty is a tax charged on the production and importation of alcohol, tobacco and oils. These goods currently move freely between the UK and EU member states with the excise duty suspended.

Changes from 29th March in a ‘no deal’ scenario include:

  • Businesses importing excise goods from the EU to the UK will have to make a customs declaration immediately on importation.
  • Unless the excise goods are placed into a customs/excise suspensive arrangement, the duty will have to be paid immediately.

Changes to the UK Trade Tariff

Under the current rules for goods moving between EU member states, there are no customs duties and no routine intervention during the movement of goods.

If no Brexit agreement is reached, trade with the EU will be on non-preferential, World Trade Organisation (WTO) terms, with the key changes from 29th March 2019 including:

  • Goods arriving into the UK from the EU after 11pm on 29th will be subject to the same requirements as ‘third country’ (i.e. non-EU) goods, including the payment of duty.
  • Different duty rates to the current EU Common Customs Tariff (CCT) will be applied to each item imported into the UK.
  • For UK exports arriving at the EU border, payment of customs duty at the CCT rate will be required by the EU.

In a ‘no deal’ scenario, the UK Trade Tariff, detailing the import duty rates and rules applicable to each type of goods, will be made available on GOV.UK.

Changes to VAT for businesses

If the UK leaves the EU without a deal, the government’s aim will be to keep the VAT procedures as close as possible to those currently in place, in order to provide continuity and certainty for businesses.

However, some specific changes will be applied to transactions between the UK and EU member states, including:

  • Postponed accounting for import VAT. This will be introduced for imports from both EU and non-EU countries. UK VAT registered businesses importing goods to the UK will be able to account for import VAT on their VAT return, rather than paying import VAT at the UK border when the goods arrive, mitigating any adverse impact on UK businesses’ cash-flow.
  • Low Value Consignment Relief (LVCR) will no longer apply to parcels arriving in the UK from overseas businesses. All such parcels will be liable for VAT (unless already relieved from VAT under domestic rules, for example zero-rated children’s clothing).
  • For parcels valued up to and including £135, a new HMRC digital service will allow UK VAT to be collected from the overseas business selling the goods into the UK. The new service will include an online registration, accounting, and payments service for overseas businesses.

In addition, the UK will no longer be part of EU-wide VAT IT systems such as the VAT Mini One Stop Shop (MOSS), currently used to report and pay VAT on sales of digital services to consumers in the EU.

For further details of the impact of VAT changes on UK businesses, see our recent blog article.

What businesses need to do from 29 March

In addition to setting out the changes to customs, excise and VAT procedures, the partnership pack includes a number of individual guides, each aimed at different business groups that will be impacted under a ‘no deal’ scenario.

These guides explain how the relevant business group’s processes and procedures would change, the new requirements they would be subject to when importing or exporting goods, factors to consider in preparing for these changes, and actions that can be taken by businesses now.

Two one-pager guides are also included in the partnership pack, setting out the step-by-step process that businesses will need to follow when importing from, or exporting to, the EU if an agreement is not reached. These guides are available under the following links:

Businesses can register for HMRC’s EU Exit update service to receive further updates on preparing for a ‘no deal’ exit.

If your business currently moves goods between the UK and the EU, and you would like help in preparing for the March 2019 changes under a ‘no deal’ Brexit, please get in touch.