Brexit planning: deal or no deal, prepare for customs

20 October 2020: With the Brexit transition deadline looming, HMRC is sending letters to all VAT-registered businesses within Great Britain that trade with the EU and/or the rest of the world.

In the letter, tax officials lay out the actions businesses need to take to continue trading with EU firms from January 1, 2021. 

“It’s really important that you act now – a free trade agreement will not remove any of these requirements,” wrote HMRC directors Katherine Green and Sophie Dean. “Unless you have all the correct processes, contracts and agreements in place you will not be able to trade with the EU from January 1, 2021.”

Businesses will need to make import and export declarations to move goods between Great Britain and the EU, as currently happens between the UK and countries outside the EU. 

Firms that import controlled goods from the EU, such as animal products, alcohol or tobacco, or firearms, have to make declarations from 1 January 2021. However, businesses that import goods from the EU into Great Britain not on the controlled goods list, and have a good compliance record, have the option to defer declarations for up to six months. They must still keep records of everything they import.

These import simplifications mean businesses will have a window to make supplementary declarations for imports, so they don’t need to declare at port, as long as they have a good compliance record, said John Boulton, director, ICAEW Technical Policy.

Businesses that rely on others such as freight forwarding companies and fast parcel operators to deal with import and export declarations have been advised to contact their partners to ensure they are covered.

“Now is the time to speak to these companies so you have everything in place by 31 December 2020, and to ensure you can continue to trade with the EU,” said Green. “The sooner you contact these organisations the more likely it is that you will secure the services you need.”

This includes details about transactions, such as how often a business imports or exports, and the type of goods, along with the quantity, customs value, and where the goods are going.

ICAEW experts said the government has been clear in its stance that firms need to prepare for customs, even if no deal is struck in the next two months, and to familiarise themselves with border control terms and definitions.

“Authorisation is necessary to make the ‘supplementary declaration’ and many businesses will use customs agents to do this,” Boulton said. “Customs is complicated and the amount of tariffs due, if any, will depend on the value, category and ‘origin’ of the goods. Businesses will need to be familiar with these terms and that means going beyond the procedural information in the letters.”

HMRC has previously said that import VAT does not have to be paid at the border if goods in a consignment do not top £135 in value. The only exceptions will be excise goods and gifts.

New rates of customs duty for imports, the UK global tariff, are still to be introduced, while the free Trader Support Service (TSS) will handle the new processes arising under the Northern Ireland Protocol from 1 January 2021.

HMRC said it will provide more guidance on changes to trade with the EU over the coming months.

Find a range of resources to help prepare for the end of the transition period on 31 December 2020 on ICAEW’s Brexit Hub.