UNITED KINGDOM - Brexit - The No Deal plan for customs declarations
HMRC, the UK tax authority, has advised businesses trading in goods with the EU to get ready to complete customs declarations after 29 March 2019 in the event of a no-deal Brexit. It has also announced transitional simplified procedures that can be used by businesses importing goods through ‘roll on/roll off’ ports, including Dover and the Channel Tunnel.
The ‘no-deal’ position
Since August 2018, the UK government has been publishing a series of Technical Notices to explain how it will implement Brexit in the event the UK cannot reach agreement with the EU on the terms of withdrawal. These include details of the VAT and customs duty changes affecting businesses who have previously only traded within the EU and will be making customs declarations for the first time.
If there is no deal, businesses will have to apply the same customs rules to goods moving between the UK and EU as currently apply to trade between the UK and non-EU countries – that is, a hard border will apply. Customs declarations will be required when goods enter or leave the UK and importers will be liable to pay import VAT and/or customs duties. Similarly, the EU will apply customs rules (and duty and VAT at EU rates) to goods it receives from the UK, requiring customs declarations on goods imported from the UK.
The Technical Notices
HMRC has written to the estimated 144,000 UK VAT registered businesses who move goods between the UK and EU, advising them to take action to prepare for the customs obligations of a no-deal Brexit. It has also published notices and details of the legal framework for the UK’s post-Brexit customs regime.
Cross border traders are advised to consider how to classify and value their goods for customs purposes, how they will pay any customs duty that may be due and whether their goods might be subject to import/export licensing. Those who do not currently trade with countries outside the EU are urged to apply for an Economic Operator Registration and Identification (EORI) number, which will be needed to complete customs declarations and apply for customs procedures.
The notices also outline how some importers and exporters may benefit from using customs procedures to reduce or manage their duty liability, such as customs warehousing (where goods can be stored with customs charges suspended until the time the goods are removed for use), temporary admission relief or inward/outward processing relief.
HMRC recommends that cross border traders decide whether to appoint a customs agent to make their import and/or export declarations or complete them in-house by using suitable software. A grant scheme is available to help businesses who complete customs declarations by providing partial reimbursement for the costs of suitable software and staff training.
HMRC also highlights that businesses who will be required to pay customs duty on their imports should consider setting up a deferment account, which allows payment of customs charges by a single monthly payment on the 15th day of the month following the month of import. Deferment is subject to an application process and requires a bank guarantee as security.
HMRC has published a detailed 'partnership pack’ to advise businesses how to prepare for changes at the UK border in the event of a no-deal EU Exit.
Transitional simplified procedures or ‘roll on roll off’ locations
In the event of a no-deal Brexit, HMRC says UK businesses importing goods from the EU through roll on/roll off ports will have the option to use transitional simplified procedures (TSP) to declare their goods to customs. This will allow importers to defer making a full declaration and paying customs duty until after the goods arrive in the UK. HMRC anticipates that these TSPs will remain in place for more than a year after a no-deal Brexit.
For most goods, importers registered for TSP must make a simplified declaration. This can either be made electronically before checking the goods onto the ferry or train on the EU side, or by an entry within their commercial records of when the goods cross the border. The importer must then send a supplementary declaration to HMRC by the fourth working day of the month after the goods arrive in the UK. HMRC will take any duty payable by direct debit on the 15th day of the month after the goods arrive in the UK.
Importers of controlled goods, such as alcohol, tobacco, or goods requiring an export licence, do not have the option of making a simplified declaration in their commercial records. Instead they must make an online declaration before importing the controlled goods into the UK, and make sure they are accompanied by full supporting documentation, for example the appropriate licence.
Registration for the TSP scheme opened online on 7 February 2019 and can be accessed via this link. Applicants must hold an EORI number and apply to defer payment of import duties, which requires a financial guarantee to be in place by 30 June 2019.
HMRC says TSP cannot be used for goods imported from outside the EU or for goods covered by a customs special procedure. It is also important to note that TSP can only be used for roll on/roll off imports from the EU - imports through other UK ports or airports will be subject to full customs declarations.
Haulage companies carrying goods across the EU border through a roll on/roll off location will be required to submit safety and security information to HMRC, although this requirement will be deferred for six months after a no-deal Brexit takes effect. For inbound goods, the information must be submitted before the goods are due to arrive in the UK. For goods being exported to the EU, it must be submitted before the goods reach the departure port.
What happens next?
HMRC continues to release ‘no-deal Brexit’ information on VAT, customs, and excise duties on an almost daily basis. So far its proposed arrangements do not apply to goods moving across the border between Ireland and Northern Ireland, and HMRC has pledged to provide information on this at a later date. Meanwhile, a modified withdrawal agreement between the UK and EU, which could keep the UK in the current EU VAT and customs systems for a transition period after 29 March 2019, is still a possibility, so the VAT and customs implications of Brexit remain subject to change.
The political situation remains highly uncertain but, for the time being, businesses should continue to prepare for a no-deal Brexit and watch out for further developments. The following BDO information may also be useful:
BDO: Brexit Planning Tool
BDO Hard Brexit Trade Assessment
BDO Insight: Why Authorised Economic Operator status is essential for manufacturers with non UK supply chains
BDO Insight: Brexit - Government sets out its no deal plan for VAT