• Date

    12 Jan 2021
  • Category

    Tax, VAT & Indirect Tax

Post Brexit briefing: 7 January 2021

On 1 January 2021, the UK exited the EU VAT regime, Customs Union and Single Market after reaching a post-Brexit Trade and Cooperation Agreement with the EU. From this date changes apply to VAT and Customs procedures including the loss of EU simplification procedures and the introduction of Customs Declarations and import VAT.  Customs ‘preference’ rules have been introduced and where specific conditions are met these can reduce import tariffs to 0% and set quotas at zero.

We would urge anyone with EU customers or suppliers to ensure they understand how the agreement affects their transactions and reporting procedures.  There will be changes to the way EU supplies are undertaken, reported and accounted for. The following notes summarise the key VAT and Customs Duty changes associated with the movement of goods. If you need more information on the points noted below, please contact one of our indirect tax specialists. We will issue additional bulletins on post Brexit issues throughout January and February. 

Key VAT Changes

The movements of goods between UK and EU business are now treated as imports or exports for VAT and Customs purposes. This means they could be liable to Import VAT and Customs Duty. UK and EU Businesses need to ensure they have the correct VAT registrations and EORI numbers to facilitate the movements of goods.

Trading with Northern Ireland (NI)

From 1 January 2021 NI has a dual position in the UK, EU Customs Union, Single Market and VAT regime.  This only applies to goods.

New 'XI' VAT and EORI (see below) numbers must be included on invoices, statistical reporting and customs documents to allow HMRC and EU authorities follow the movement of goods. 

Goods that fall under the new NI Protocol include:

  • Goods located in NI at the time of sale;
  • Goods supplied ‘B2B’ in NI by VAT-registered EU businesses; or
  • The sale or movement goods from NI to EU

All trade between NI and EU should be recorded in boxes 2, 8 and 9 of UK VAT returns as EU transactions – ‘acquisitions’ and ‘dispatches’.

Key Duty Changes

The following points should be considered and confirmed by all businesses that move goods to and from EU countries:

  • Origin of goods - The 0% import tariff preference can only be applied to goods that meet specific rules of origin and can be certified as ‘originating’ in either the EU or UK.
  • Customs declarations (Non-Tariff Barriers) – Even where goods qualify for the 0% import tariff, the content and submission of customs declarations and supporting documentation should be confirmed. A commercial invoice, certificate of origin, health certificates, bill of lading, packing list etc. are now required to evidence the movement of goods.   
  • Incoterms (shipping terms) - Incoterms confirm responsibilities and liabilities between sellers and buyers. They apply to the movement of goods between the EU, UK and the Rest of the World. They are important as they evidence which party is responsible for making customs declarations and import duties and Import VAT.
  • Commodity codes – The commodity codes used to declare goods at import and export should be confirmed. These codes determine the value of Customs duty due on imports. The codes are also relevant when considering the origin of goods especially those that have undergone some form of processing or manufacture.
  • Engaging a customs agent – Customs agents are engaged to prepare and submit export or import declarations. The basis of each engagement should be considered and confirmed in writing to ensure there is no ambiguity over the service and basis of the representation provided by the agent.
  • The UK Global Tariff – Any import duties levied on goods entering the UK will be based on the new UK Global Tariff. This replaces the UK’s reliance on the EU Common External Tariff. Businesses may therefore find their 2021 import duty rates are lower than the historic EU Tariffs.
  • Authorised Economic Operator (AEO) status – The EU and UK have agreed the mutual recognition of this regime for businesses that hold AEO (S) status. This provides streamlining benefits for businesses moving goods between the EU and UK. The UK has negotiated a similar agreement with Japan.
  • The Goods Vehicle Movement Service (GVMS)/Smart Freight System – These are new platforms which are being used by a number of UK ports to coordinate the movement of vehicles. The GVMS service amalgamates various declaration reference numbers into one Goods Movement Reference (GMR). The registration and associated requirements will depend on your supply chain and whether you are a business (‘trader’), a carrier or a haulier.
  • Northern Ireland – The Northern Ireland Protocol has introduced changes to the treatment of goods that move from the UK to Northern Ireland or from Northern Ireland into the UK.  These currently include the requirement to submit Safety and Security (ENS) declarations, import declarations and Sanitary and Phytosanitary (SPS) measures. Businesses should also consider whether they can use the new UK Trader Scheme as an authorised business to manage ‘at risk’ and ‘not at risk’ goods to reduce the possibility of import tariff being levied.

If you have any queries in relation to the content of this article, please get in touch with your usual Azets contact.

About the author

Lucy Sutcliffe Photo

Lucy Sutcliffe

Director of National Customs Duty Peterborough
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