Follow our quick-start guide, outlining a variety of areas that could impact your business post Brexit.
Where will you get more cash if you need it?
Assess how much working capital you need. Consider how you would access additional funds, if needed
With cash flows already under strain due to the pandemic, businesses should plan ahead and think about how they could deal with further economic uncertainty in 2021. Economic uncertainty might affect sales, the collection of debtors or inventory levels. Businesses may need more cash at hand so they can make sure they continue to make payments on time.
What help do you need to access potential new markets?
Consider how you would start activities in new markets, should opportunities arise
The UK government has already negotiated and is seeking more new trade arrangements with countries outside of the EU/EEA. Many of these trade agreements are still in progress. Should they result in improved trade conditions for UK businesses, there may be first mover advantage in accessing these markets.
What to do if EU/EEA/Swiss employees missed the deadline to register for the settlement scheme?
The deadline to register for the settlement has now passed
Employees who are EU/EEA/Swiss nationals and who live in the UK by 31 December 2020 were required to register for the settlement scheme by 30 June 2021. Find more information for late applicants via the link below.
What tariffs apply to imports to the UK?
Understand how tariffs could affect you
Tariffs, or customs duties as they are known in the UK, are a tax levied on imports. There are no tariffs on trade wholly within the EU customs union, and the UK’s trade with the rest of the world has been subject to EU tariff rates. From 1 January 2021, tariffs on imports to the UK depend on preferential trade agreements the UK has negotiated, which can differ from country to country, or on World Trade Organisation (WTO) rules. WTO rules stipulate "most favoured nation" tariff rates, which apply where a preferential tariff has not been negotiated.
The UK-EU Free Trade Agreement means that there are no tariffs on imports to the UK that “originate” in the EU, or on imports to the EU that “originate” in the UK.
For imports from other countries, the rate of customs duty (tariffs) depends on four elements:
1. the customs value of the goods
2. the type of goods (their commodity code)
3. the country they are being imported into, which includes:
- Databases to look up tariffs: UK trade tariff; TARIC EU tariff database; and
- UK guide to exporting – country by country;
- Use Market Access Map to identify customs tariffs.
4. where they are judged to have "originated"
What you need to know about new customs rules
From 1 January 2021 the UK is a separate custom territory from the EU
This means that all imports and exports of goods to and from the EU will be subject to customs procedures, both in respect of EU goods imported into the UK and UK goods exported to the EU.
The UK’s Free Trade Agreement with the EU will have no impact on the urgent need to review your importing and exporting arrangements and potentially take these actions.
What you need to do?
There are clear actions traders should take to prepare for the staged introduction of customs controls. All involved in supply chains will also need to consider the EU border requirements, procedures and access to EU or individual Member State’s systems. These will need to be met before moving goods.
1. Apply for a GB EORI number
To import or export goods into the UK you will need an GB Economic Operator Registration and Identification (EORI) number. This is required for all businesses (traders and hauliers) moving goods into or out of GB, including those delaying their import declarations. If you don’t have an GB EORI number, you will not be able to import and export goods into the UK. You will need to apply for a number. The application process takes about five to ten minutes, but it can take up to a week to get the number. HMRC has auto enrolled VAT registered businesses with EU trade which did not have an EORI number, so you should check whether you already have a number before applying because you won’t be given a new EORI number. If in doubt or you have lost the piece of paper, contact HMRC to check, EU based traders and hauliers will need a GB EORI number to carry out border formalities in GB.
2. Apply for an EU EORI number
Some GB traders or hauliers may also need to apply for an EU EORI number. Traders need an EU EORI number if their business will be making customs declarations or getting a customs decision in the EU.
3. Get a Customs Intermediary
Customs declarations are complicated. Most businesses that currently trade outside the EU use an intermediary, such as customs agents, Fast Parcel Operators (FPOs), Freight Forwarders (FFs) or brokers, to help them meet the customs requirements.
Intermediaries can help traders find the information needed to complete formalities and submit the required declarations into HMRC’s customs systems, including for example information such as the value and origin of goods. Using an intermediary simplifies the declaration processes for traders. The UK Government has announced a grant scheme to support intermediaries and those traders who want to make declarations themselves.
If a trader decides not to use an intermediary, the trader will need to make declarations themselves. To do this the trader will need to get access to HMRC systems and to purchase software. GB Traders may also need an EU intermediary or fiscal representative to carry out export and or import formalities in the EU.
4. Apply for a Duty Deferment Account
The basic rules of customs are that imported goods need to be declared, and any duties paid (which could include VAT, customs and excise duties), at the time of importation. However, traders who import goods regularly may benefit from having a “duty deferment account” (DDA). This enables customs charges including customs duty, excise duty, and import VAT to be paid once a month through Direct Debit instead of being paid on individual consignments. With effect from 1 January 2021, VAT registered traders can account for import VAT on their VAT return using postponed VAT accounting. To set up a DDA, traders, or their representatives, apply for a deferment account number (DAN) and will need to be authorised by HMRC. New rules have been introduced which allow most traders to use duty deferment without a Customs Comprehensive Guarantee (CCG).
5. Prepare to pay or account for VAT on imported goods
From 1 January 2021, if you are VAT registered and completing full customs declarations and have chosen not to defer your customs declaration, you can choose to adopt postponed VAT accounting to account for import VAT via the VAT return.
If you are importing non-controlled goods (see HMRC’s List of controlled goods from 1 January 2021 – broadly excise goods and a range of others for which licences etc are usually required) and either delaying your supplementary customs declaration, or using Simplified Customs Declaration process (where authorised to do so, and making an Entry in Declarants Records), you must use postponed accounting and account for import VAT on your VAT return.
Non-VAT registered traders (and any VAT registered traders not using postponed VAT accounting) will need to report and pay import VAT through the customs processes. Within this context, VAT payments can be deferred using a duty deferment account DDA.
With regards to VAT on imports of goods in consignments not exceeding £135 (excluding Excise and consumer to consumer consignments), the point at which VAT is collected will be moved from the point of importation to the point of sale. This will mean that UK VAT, rather than import VAT, will be due on these consignments and therefore accounted for via the VAT return.
Although the UK will become a separate customs territory, there are special rules in relation to goods imported and exported from and to Northern Ireland. Find out more
Do you know how the border operates?
Controls will apply at both the UK and EU borders. For example, for goods moving from the EU to the UK, goods will need to clear export procedures at the EU border and then import procedures at the UK border. In essence, at each border both customs declarations and "safety & security" declarations will need to be presented. Additional requirements apply to certain goods.
For the UK border, the process that will apply depends on:
When you cross the border: Controls are being introduced in phases between January 2021 and November 2022. Simplified procedures apply to imports for the first 12 months.
Which port you use: Some border posts will use a "pre-lodgment" model where consignments will need to be cleared electronically before they can pass through, others will use a temporary storage model where goods can be stored temporarily at the port while they’re being cleared. Transport providers may provide specific guidance for their route, for example:
What goods you’re carrying: Additional controls apply to certain goods. For example, any goods subject to sanitary or phytosanitary controls. Lists of the goods subject to additional controls, along with the specific requirements, are in the border operating model.
Businesses should therefore carefully read the UK border operating model, similar guidance has been published by some EU customs authorities:
During the initial 12 month period from January to end December 2021, importers to the UK can defer their customs declarations for "standard goods" – as long as they have a good compliance record. This means they will not have to present a customs declaration at the point of entry. They will record imports in their own commercial records and then have up to six months to file a "supplementary declaration" with HMRC. To file those declarations importers will need to have:
- access to an authorisation for the Simplified Customs Declaration process. That means using an agent who is authorised, or being authorised themselves, and
- a Duty Deferment Account. HMRC advises importers to set up their own Duty Deferment Account.
Importers can opt to file a full declaration at the point of entry if they prefer. Note that traders submitting a simplified frontier declaration to declare goods at the point of their arrival in the UK, rather than making a record into their own commercial records, will not be able to delay their supplementary declaration and payment of any customs duties.
Low value shipments
For consignments of £135 or less being shipped into the UK a separate scheme will apply; for these shipments the vendor exporting to the UK will be required to charge and collect any VAT due at the time of sale. If VAT has not been charged then the purchaser will need to settle this themselves. VAT registered businesses can do this on their VAT return as a "reverse charge".
Safety & Security Declarations (Exports & Imports)
Safety & Security declarations are required to provide more information to UK/EU governments about goods moving into their countries. Safety and security declarations will not be required for goods moving into Great Britain from the EU up to 30 June 2022. From 1 July 2022, safety and security requirements on these movements will be phased in. Safety and security requirements apply to exports from Great Britain to the EU from 1 January 2021.
Carriers have a legal responsibility to ensure that the customs authorities are provided with safety and security pre-arrival information. Note that additional information and processes will be required for certain types of goods, for example those subject to sanitary or phytosanitary controls. Full details are in the UK border operating model.
International schemes to make customs clearance easier
The UK and EU authorities recognise certain schemes, which traders can apply to use:
- Common and union transit: using ‘transit’ means traders will not need to make customs declarations at every border crossing and allows some customs processes to be completed away from the border.
Do your contracts clarify who is responsible for export/import formalities, duties and VAT?
Review your principal contracts to see how they would deal with uncertainty or different trading conditions
It is particularly important that they adequately clarify the terms for trade across EU borders, including how VAT and duties are dealt with and who is responsible for import and export formalities. You need to consider how your contracts and International Terms and Conditions of Service (INCOTERMS) reflect you are now an international exporter or importer.
Do you receive personal data from the EU/EAA?
In June 2021, the EU agreed an adequacy decision for the UK.
This means the free flow of personal data from the EU and EEA to the UK can continue as before, although there are some caveats.
How are changes to VAT affecting you?
Consider how you will register for MOSS for online sales in the EU-27. Claim refunds on sales into the EU.
Postponed accounting is being introduced for VAT on all imports. It means that VAT registered businesses will not need to settle import VAT immediately at port and can instead account for it on their VAT return.
The "mini one stop shop" (MOSS) allows businesses that sell digital services to consumers in EU member states to report and pay VAT via a single return and payment. UK businesses can continue to use the system after the transitional period ends by registering in an EU member state.
UK businesses will lose access to the EU VAT refunds system after the transitional period ends so claims should be made before then.
HMRC is introducing new procedures for parcels sent into the UK from abroad. After the transitional period ends these procedures will apply to parcels sent from the EU. For parcels with a value of less than £135 the business sending the parcel will need to register with HMRC’s digital system and settle any VAT and duties due online.
Do your corporate reports reflect Brexit risk?
Having evaluated Brexit related risks for your business, consider how they might impact on your reporting.
You should consider how uncertainty affects judgements and estimates, going concern and, for businesses that prepare them, viability statements
The directors’ report and strategic report are an opportunity to communicate how the board is taking account of the challenges and opportunities of Brexit. Readers may find disclosures more useful where they distinguish specific, direct challenges to the business model and operations from the effects of broader economic uncertainties.
Uncertainty will mean businesses need to pay particular attention to judgments and estimates, in particular when assessing assets for possible impairment.
ICAEW members: other useful resources
The business checklist above outlines the business implications of Brexit. ICAEW’s Brexit hub also contains information on the technical implications of Brexit for the accountancy profession. ICAEW members should familiarise themselves with all that apply to their situation:
Further Brexit resources
Read more Brexit guidance
Find a range of resources to help prepare for the end of the transition period.
Send us your questions
Get in touch with ICAEW
Send us your Brexit-related questions so we can help you find the information you need.
Small practice advice
Advice for small practices
Find out how as a small practice you can prepare during the transition period following Brexit.