Getting ready for Brexit: New customs and tax rules

brexit customs tax rules

The end of the UK’s Brexit Withdrawal Agreement (WA) with the EU is fast approaching. Importing goods to the UK after Brexit in 2021 will be quite different from how it is now with new tax rules, procedures and processes to consider.

This article considers what importing Brexit goods might look like and examines the possibilities of tariffs and taxes that might affect trade. Find out now how businesses and transport will have to adapt once the 1st January 2021 arrives.

What were the rules for importing goods while the UK was in the EU?

Whilst the UK was still in the EU the country was part of the organization’s Customs Union, Single Market and VAT agreement. This made the movement of goods across borders relatively straightforward and the UK remains a part of these agreements until December 31st 2020.

At the moment and until the WA ends, importing goods to the UK requires no additional checks or VAT requirements for a company to fulfil. This, however, is set to change once 2021 begins.

UK customs in 2021

The UK will leave the EU’s VAT regime, Customs Union and Single Market once the Withdrawal Agreement ends unless a Free Trade Deal (FTD) is struck. At the time of writing, this has not yet occurred and it is possible that the UK will no longer participate in these agreements from 2021 onwards.

It is not yet clear whether tariffs will be levied against goods entering either the EU or the UK when crossing their borders. However, if an FTD isn’t agreed in time, tariffs will become a reality and importing goods will become more expensive.

In addition, new safety and Brexit customs checks and declarations will become a necessity from 2021 for all goods exchanged between the UK and EU. The extent to which this will affect businesses is not yet fully clear, as both parties hope to minimise the extent of the disruption this could cause.

To reduce delays to hauliers and importers, customs declarations can be made in advance of the movement of goods into the UK. This will be done electronically but it will be essential for companies to clearly understand the following:

  • The customs classification of their goods/services
  • Tariffs to be paid
  • Import/export licenses required
  • Any special authorisations necessary
By understanding these necessities in advance, business owners will be able to adequately prepare for the new realities brought about by Brexit.

Requirements for importing goods from the EU to the UK after Brexit

Importing goods from the EU to the UK after Brexit will be different from how it is now. EU businesses and UK companies shipping goods into Britain or Northern Ireland will be subject to new rules and restrictions based on the services or items they are importing.

Primarily businesses will need to ensure they do the following:

  • Declare the export to the EU
  • Declare the import to the UK
  • Ensure that they have a trading representative in the UK

Special considerations will need to be made depending on the precise goods being moved across the UK border. Let’s consider these below.

Food, drink or agricultural products

Companies hoping to import food, drink or agricultural goods into the UK will need to consider a number of matters. These include the following:

  • They must register for a GB Economic Operator and Registration and Identification (EORI) number.
  • Assess whether a UK import/export agent will be required.
  • Contact their logistics provider to prepare for necessary declarations you will need to provide in advance.

Furthermore, the labelling of foreign-manufactured food and drink goods will need to change too. They will need to ensure they conform to the appropriate UK control body requirements and display the logo of the correct standards body within Great Britain and Northern Ireland, as well as detailing the country of origin.

Animals, animal products, high-risk food and feed of non-animal origin

There are significant changes coming to how animals, animal products, high-risk food and feed of non-animal origins. Live animal, feed and animal products imports will be subject to the newly created Import of Products, Animals, Food and Feed System (IPAFFS). This will be used to notify relevant quality and customs agencies of the arrival of the goods.

The UK is expected to duplicate EU policy for health certificates on live animals. However, unlike before farmers and businesses will need to acquire a unique UK health certificate prior to importing animals and animal products.

Importing goods in luggage or by car

Some imported goods from the EU being brought into the UK will need to be declared even if you arrive in the country in your personal vehicle or they are being held in your personal luggage. Goods that must be declared if they are any of the following:

  • Items over £875 in value
  • Goods that weigh over 1000kg
  • Articles that are subject to Excise or license rules
  • Restricted items

If required to make a declaration importers should apply no later than 5 days in advance of travelling to the UK. This will facilitate a quick and easy border crossing on arrival.

Regulations on bringing cash into the UK

Those arriving with over £10,000 in cash in the UK will be required to make a declaration. This must be done online at least 72 hours before arriving in the country. Cash in this instance includes any of the following:

  • Notes and coins
  • Cheques or traveller’s cheques
  • Bankers drafts

VAT rules after Brexit

There will be a few changes to VAT rules once Brexit has fully taken place. However, for the first six months of 2021, these will be waived in order to give businesses time to adjust to the new system.

In order to correctly fulfil the obligations for tax after Brexit, companies in EU27 countries will need to register for a UK VAT number. Vice versa British organisations hoping to trade with the EU will need to have registered for an EU VAT number.

Companies must register for UK VAT if they are an Online Market Place (OMP) facilitating the sale of goods located outside the UK to resident customers in Great Britain. They must also register if they are making direct sales to UK-based customers of goods from outside the country.

Items under £135 in value being brought into the UK to be sold are exempt from VAT. This is already the relief value for items and consignments being brought into the country under current rules for countries outside the EU.

How to avoid excess VAT charges: Actions to prevent customs and VAT friction

There are many changes to be aware of when 2021 begins. In order to avoid overpaying on the costs of customs clearance and declarations and prevent costly delays, importers should remember the following advice:

  • Apply now for the appropriate VAT number with the EU/UK/EU and UK.
  • Appoint a VAT fiscal representative in the foreign country that is being imported from if necessary.
  • If selling digital services EU, apply for a new EU MOSS registration.
  • Prepare accounting practice to work with the upcoming Postponed Accounting that will apply to import VAT. This allows importers to avoid paying these costs at the border.
  • Make sure to submit outstanding EU VAT claims incurred before 31st December 2020.
  • Assess how supply chains may need to be modified to adapt to the new changes.
  • Confirm which party in the importing process will be the ‘importer of record’.
  • Check if an import or export license is needed.
  • Remember that importing goods to Northern Ireland will be different from importing to Great Britain.

Brexit has requires many readjustments of the status quo. With new customs and VAT rules and possible travel necessities like the UK eTA, there are many things to prepare for in advance. By planning now, disruption is likely to be minimal once 2021 begins.