The trade agreement was finally announced on Xmas Eve and the UK began its Post Brexit era on 1st January 2021.
Even now a year in, there is a crisis in supply chains and part of this is down to the Covid crisis and containers with PPE being on the wrong side of the world which is causing delays in getting global supply routes moving again. In addition, as we all know there is much political unrest between the UK and EU over the operation of the protocol and businesses trading with NI will need to keep a close eye on developments and changes.
To compound matters further we saw significant changes to EU VAT and in particular e-commerce sales.
1. The importance of Incoterms – incoterms underpin 4 the import responsibilities and where the risk for the transport, insurance and delivery of the goods rests. As all goods moving into or out of the UK are now exports or imports these terms must be identified as part of the transaction. DDP = delivered duty paid. This means you as the seller have import responsibilities you perhaps hadn’t bargained for. Whereas agreeing DAP terms (Delivered at Place) means the customer takes on those responsibilities.
2. Paperwork – To be able to move and clear goods as an import or export, the standing data and basic details need to be communicated properly in the paperwork provided to the logistics company. This means commercial information such as the correct commodity codes, Incoterms, the exporters and importers details and their EORI and VAT numbers. We can often trace a problem back to this initial data not identifying the right importer or not having the very important EORI number in the data.
3. Having the right type of Customs agent representation to clear goods – This has been one of the key issues in post Brexit trade. UK businesses importing into the EU and which do not have a business entity or establishment in the EU, will need to have an indirect representative. This type of agent is jointly and severally liable for Duty and VAT debts. Therefore, the high level of risk means it is very difficult for UK businesses to find the support they need in this area. It is an issue which takes time and cost to resolve.
4. Please do not claim back overseas VAT on the UK VAT return – If you incur European VAT there is a special refund service which results in claims being made to each EU country. All the countries have different requirements and in some instances fiscal representation. Incurring EU VAT on goods raises questions to us as advisers. Should your business be VAT registered in that country? These are also the questions the tax authorities will ask. If you are buying and selling goods in the EU you must be aware that this is most likely to result in a VAT registration obligation. Different countries have different rules.
5. MSS data – This is a useful information source to track your customs compliance in respect of imports into the UK. It costs £20 a month but lists all imports made in your name, the commodity code and other useful information. As an importer you have compliance responsibilities, it is not the agents responsibility to make sure it is correct.
6. Rules of origin – It is a general misunderstanding that the free trade agreement meant no tariffs on cross border trade. Whilst the UK has lowered many tariffs to 0% the crux of tariff free trade relies on meeting complex rules of origin. The rules relating to this are tightening up next year meaning UK exporters will need to ensure that satisfactory evidence is available to demonstrate the exported goods meet the applicable rule of origin. Any company providing a statement on origin on its commercial invoice will need to have this evidence, otherwise the claim for preferential status will be denied by HMRC. Depending on the rule of origin, this could require declarations to be obtained from all UK, and even EU, suppliers of materials and components.
7. Selling B2C into the EU may result in VAT registration – Simplification procedures such as OSS or IOSS will help to minimise the reality of multiple EU VAT registrations. This will mean just 1 return for all EU sales which are B2C. This also includes the sale of digital and other services to consumers.
8. Customs relief regimes – Businesses which import goods for manufacturing, processing or repair should seriously look at the following regimes to minimise that bottom line cost of Customs Duty.
– Customs warehousing
– Inward processing relief
– returned goods relief
9. Postponed VAT accounting – The UK Government introduced Postponed VAT accounting which enables the importer to account for the import on the VAT return rather than paying import VAT up front and then claiming it back a month or so later. It is a great cash flow benefit but has had its teething problems. By using PVA you are not paying agents fees unnecessarily for using their deferment accounts to clear goods.
10. Duty Deferment Account – Get a Duty Deferment Account if you are incurring Customs Duty as this ensures minimal delay on customs clearance and reduces agent fees for use of their deferment. Since January, guarantee waivers can be authorised by HMRC to further minimise any additional costs of having a deferment making this a effective way of managing your UK duty liabilities.
For help with your post-brexit planning and how your business can adapt its processes, please contact a member of our Indirect Tax Team using our online enquiry form – macintyrehudson.co.uk/contact