Brexit Preparations – What you need to do now October 2020
In recent weeks Brexit is back on the agenda. We are reminded that the UK is leaving the European Union at the end of the year and as a business you need to look at what changes you must make if you are trading with the EU moving forward.
With less than three months to go there are still a lot of uncertainties. However, if you are trading with the EU you will need to make changes from 1st January, and you need to start preparing now.
HM Revenue and Customs (HMRC) has written to all VAT registered businesses trading with the EU and outside the EU on what needs to be done to prepare for the exit.
From 1st January 2021 the UK will operate a full external border with the EU, and this will mean the following:
From 1st January businesses will need to submit full declarations when importing and exporting goods that are categorised as “controlled”, see definition below.
The import processes for most other goods i.e. “non controlled” goods will be introduced in three stages in January, April, and July:
January – keep basic records and account for VAT. Prepare for basic customs preparations (supplementary declarations) but will have six months to complete customs declaration.
April – all products of animal origin like meat, eggs will need pre-notification and health documentation.
July – start making full customs declaration at point of import and pay relevant tariffs.
Businesses need to make sure they have a UK Economic Operator Registration and Identification (EORI) number which starts with GB for the UK.
Businesses need to decide on how to make the customs declarations. Do you want to use a Customs Agent?
It will be possible to account for the import VAT on your VAT return for the goods imported rather than having to pay it upfront and recovering later (using form c79 currently).
Import VAT will not be due at the border if the value of goods does not exceed £135 as reverse charge rules will apply.
HMRC says more guidance will be issued over the coming months. We will also do a follow up Blog on the changes to the VAT Return.
So here are the 3 things you need to do now
Apply for an EORI number – UK & EU
Businesses trading with the EU need to have a UK EORI number and you can apply to HMRC to get one. Use the following link to apply if you have not done so already https://www.gov.uk/eori
You will also need an EU EORI number if you export to the EU. You apply for this number in whichever EU country you deal with perhaps the country where you submit the first return. You can find a list of EU Customs websites using this link https://ec.europa.eu/taxation_customs/national-customs-websites_en
You only need to apply to one EU country and get a single EU EORI number.
Check that you are not supplying “controlled” goods
Controlled goods are goods that must have a licence to import like alcohol and tobacco which have additional duties on them plus items such as military items and firearms. There are no major changes apart from minor legislative changes. You will need to continue to apply for licences as you do now.
For imports of non-controlled goods you need to record the goods in your own records, account for the VAT in your VAT Return and make a supplementary declaration up to 6 months after the goods were imported until end of June.
Decide if you need a Freight/Custom Agent?
If you are importing into the UK from the EU, have you spoken to your current Freight Agent? Are they happy to make the customs declaration for you? Many of them are going to have capacity restrictions and therefore you need to make sure you have a secure contract with them starting day one. If not, you are going to be stuck at the port. Our advice is to contact your agent or appoint one as soon as you can.
Custom Agents and Freight Agents are not necessarily the same thing. Custom Agents are brokers typically dealing with import and exports on the international deliveries and they deal with EORI requirements and they will make sure you have all the paperwork to facilitate clearance of goods through customs. Freight Agents deal more with logistics, but many are also Customs Agents.
Duncan Buchanan of the Road Haulage Association says “there are not nearly enough new Customs Agents in place before the 31st December deadline”.
In addition, a report from the Institute for Government thinktank said that the £84m provided by Government to date to train new Customs Agents so far will not be enough to cover the number of agents required to handle 215m new pieces of customs clearance paperwork.
Other things to consider
If you are a manufacturer, you also need to consider the trading standards. You will need a UK trading mark but if you are exporting to the EU you will need to follow their standards as well. You need to make sure you are happy with the marking and labelling of your goods.
You should contact your trade body.
There has been a lot of time added to your admin function over the last few months to change with Covid-19 and previously you would not have had to worry about customs within the EU. But now you need to make sure you are both UK and EU compliant, and follow the new VAT Return. It is important that you follow the process now.
If you have not done so already and we know many of you started preparing last time we were talking about no-deal Brexit, you need to put Brexit back on your “to do list”.