by Rebecca Burn-Callander
The UK withdrew from the European Union on 31 January 2020 after four years of Brexit negotiations. A trade deal is now in place that affects how UK businesses import and export goods and services from the EU. How do the new rules affect your business? Do you need to take any actions to keep trading? In this series, we look at the impact of Brexit on your business and outline your options. Please note that these guides are relevant to businesses operating out of the UK, Scotland and Wales; Northern Ireland now follows a separate set of rules.
I buy from the EU – what do I need to do now?
The UK has struck a free-trade agreement with the EU, which allows most businesses to continue buying goods from their suppliers on the Continent. However, UK companies must make sure they have the relevant paperwork and authorisations in place in order to trade. This means reviewing customs and excise procedures, as well as your system for making VAT payments and claiming refunds.
To trade goods with EU countries, you need an Economic Operator Registration and Identification number. This number will begin “GB…”. HMRC began issuing this number to the UK’s importers last year but if you haven’t received one you can apply directly here.
Any UK business that is registered for VAT and imports goods from the EU can now access a new system called “postponed VAT”. This means that instead of having to pay VAT upon entry to the UK (at a port, for example), you can record the VAT on your VAT Return and pay it later. However, businesses that are not registered for VAT (because they don’t need to) have been having a headache with VAT reverse charges. The reverse charge moves the responsibility for VAT from the seller in the EU to the buyer in the UK (otherwise the EU seller would have to register for VAT in the UK!).
The idea is that the UK buyer can later recover these costs through an EU VAT reclaim. However, if the UK business isn’t registered for VAT, they have no recourse to claim this cost back, which can make the imports extremely expensive. There is currently no easy solution other than to register for VAT voluntarily (you need to turn over more than £20,000), before you hit the £85,000 threshold where it is mandatory.
The government has introduced a system called “delayed customs declarations” to help UK importers. This means that most UK companies importing goods can wait up to six months to make a customs declaration and make customs payments. However, companies importing controlled goods such as tobacco and alcohol may not be able to access the scheme. Customs documentation and payments can be handled by a third party freight forwarder or customs broker but if you want to do it yourself, you must register for the CHIEF system through HMRC. You will also need to apply for a duty deferment with HMRC.
The UK/EU trade deal means that tariffs will not be applied to traded goods provided they meet certain criteria, and there are no quotas in place either, which is good news for importers. However, the tariffs only stand at 0% if the raw materials within imported goods originate from the UK or EU. Check the government’s guidance on Rules of Origin for further detail. If the goods do not meet the Rules of Origin they can still be traded but may be subject to a tariff under the World Trade Organisation’s Most Favoured Nation (MFN) rules. These tariffs may not be particularly high so it’s worth checking what you would pay before making major changes to comply with the Rules of Origin.
Most businesses that rely on EU imports are likely to have all the required paperwork in place already but, for occasional importers, there is a lot of complexity. Small business advisors have recommended looking for alternate suppliers in the short term as the time and money required to comply with the new rules may make EU imports unviable at this time. Please note that UK importers receiving goods by post have a different set of rules to follow. A good place to start is the government’s Brexit readiness online survey.
Here is the full detail of the UK’s Brexit trade deal with the EU.
Defer duty payments when you import goods
Apply for your EORI
Receiving goods by post
Rebecca Burn-Callander is a freelance journalist and the former Enterprise editor of the Daily Telegraph. She specialises in writing about small businesses and entrepreneurs, and is currently working on her second book: The Daily Telegraph Guide to Brexit for Business.