How BDO can help you with Customs duty and international trade?
While the UK government and the EU have agreed a Brexit extension to keep the UK in the EU a little longer, the risk of a no-deal Brexit remains until a withdrawal deal is approved by Parliament. Businesses trading in goods with the EU should continue to prepare to complete customs declarations in case a no-deal Brexit occurs later in the year.
What will happen if there is a no-deal Brexit?
If there is no deal, HMRC says that 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 – ie 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. It is important to note that, unlike VAT, customs duties are irrecoverable and represent a real below-the-line cost to businesses.
HMRC has already published numerous online guides and a legal framework setting out how it will implement a no-deal Brexit. This includes details of the VAT and customs duty changes affecting an estimated 144,000 businesses who have previously only traded within the EU and will be making customs declarations for the first time.
Here is an outline of HMRC’s no-deal Brexit plans for key customs processes:
Customs duty and the UK-only tariff
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. In case of a no-deal Brexit, HMRC has drafted a UK-only customs tariff which will apply duty to some imports from the EU – see this BDO article for more information.
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 fifteenth day of the month following the month of import. Deferment is subject to an application process and requires a bank guarantee as security.
Making customs declarations
HMRC urges UK businesses who do not currently trade with countries outside the EU to apply for an Economic Operator Registration and Identification (EORI) number, which will be needed to complete customs declarations and apply for customs procedures. Applications can be submitted to HMRC online here.
HMRC also 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 for a limited time to help businesses who complete customs declarations by providing partial reimbursement for the costs of suitable software and staff training.
Transitional simplified procedures for customs declarations
In the event of a no-deal Brexit, UK businesses importing goods from the EU 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. TSP was first launched in February 2019 as a solution for goods moving through ‘roll-on, roll-off’ ports, including Dover and the Channel Tunnel, but has since been expanded to cover all ports and airports. 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 in for shipment 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 import or 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.
Registration for the TSP scheme can be applied for online here. Applicants must hold an EORI number and apply to defer payment of import duties, which requires a financial guarantee. HMRC says TSP cannot be used for goods imported from outside the EU or for goods covered by a customs special procedure.
Safety and security declarations
Carriers transporting goods across the EU border will be required to submit safety and security information (known as entry summary declarations) to HMRC – they act as a pre-alert so customs officials can decide whether or not to examine the goods before customs clearance. For inbound goods, this 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.
Customs procedures and duty relief
HMRC has also outlined 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. Authorisations for these customs procedures that were issued in the UK by HMRC will still be valid in the UK after a no-deal Brexit, but traders holding an authorisation given by a customs authority elsewhere in the EU will not be able to use it to receive goods in the UK after a no-deal Brexit and will need a separate authorisation from HMRC.
The border between Ireland and Northern Ireland
The UK government has confirmed a strictly unilateral, temporary approach to checks, processes and tariffs for goods crossing the land border between Ireland and Northern Ireland in the event of a no-deal Brexit. The UK government says that, for most goods, there will be no customs requirements and the UK’s temporary import tariff will not apply to goods crossing from Ireland into Northern Ireland. Customs checks will be confined to high risk goods, such as dangerous chemicals and animal/plant products.
Precise legislation on this has yet to be published, and it should also be noted that Irish government has yet to make any comment on its own approach to customs checks at the border if there is a no-deal Brexit.
Until a final agreement is reached on when and how Brexit will take effect, its customs implications will be subject to change. For the time being, businesses trading in goods with the EU should continue to prepare for a no-deal Brexit by taking the following steps:
- Apply for an EORI number
- Register for Transitional Simplified Procedures for customs declarations
- Check the draft UK-only tariff for any changes to the classification or duty rate on the goods you import
- Apply for a deferment account
- Consider whether applying for customs procedures could help manage your customs duty liability
- Consider applying for Authorised Economic Operator (AEO) status to protect your business against supply chain interruptions – see this BDO guide for further information.
The following BDO information may also be useful:
BDO: No-deal Brexit: Government releases tariff with details of customs duty rates
BDO Hard Brexit Trade Assessment
BDO microsite: Brexit planning for business
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