As we all know on 1st January 2021 the Brexit transition period will end and new rules will come into force for importers and exporters to and from the EU. If your business imports or exports goods, are you fully prepared?
Below are a few key questions to ask yourselves:
1. Have you got an EORI number?
Businesses importing or exporting goods must have an Economic Operators Registration and Identification (“EORI”) number. If you’re VAT registered, HMRC should have issued one automatically. If not, you can easily obtain an EORI online.
2. Are you ready to lodge customs declarations?
To import or export goods, a customs declaration needs to be lodged with HMRC. This requires specialist software, many businesses rely on an agent (usually a logistics provider or customs broker) for this. If you haven’t engaged anyone yet, I recommend contracting and agreeing fees with your chosen agent now to avoid capacity constraints and/or price increases for leaving it to the last minute.
Once engaged, speak to your agent and understand how everything will work – what information they’ll need, how and when you’ll communicate it etc. Bear in mind that if the declarations are wrong, HMRC will come after you, not the agent, so you need to take steps to ensure they are correct.
3. Have you considered customs duties?
If a free trade agreement is not negotiated with the EU, duties will be payable on goods imported into the UK or the EU. The rate of duty depends on three factors:
1. What is it (classification)? Every tangible good can be assigned a ‘commodity code’ – an 8-10 digit number that determines the rate of duty payable
2. What is it worth (valuation)? Normally the invoice value but adjustments may need to be made to include royalties, tooling, commission etc. What if you’re importing your own goods, or samples and there is no invoice? How will you value them?
3. Where is it from (origin)? – if the UK has a trade agreement with a third country, goods originating from that country may benefit from a preferential rate of duty.
The easiest way to pay duties is through a duty deferment account – you should consider whether one of these is appropriate.
4. Have you spoken with your suppliers/customers to determine who will be responsible for customs duties and declarations?
Who does and pays what is determined by contractual terms, or ‘incoterms’. Much like transport or insurance, you will need to agree with customers/suppliers over who does what.
It is unlikely that customs duties and declarations have been considered (as they haven’t been applicable since 1973).
Think about what is appropriate – do you want your customers doing their own import declarations and paying duties? Is your supplier capable of managing this additional requirement without causing delays?
Do consider that if you want to act as importer into or exporter out of the EU, you’ll need an EU EORI number (which creates its own headaches). This is a complex area so if you’re thinking of doing this, please speak to your tax advisor.
Confused yet?! Don’t worry, this is a minefield so many people will feel the same as you do! The good news is that help is available if you need it. At BHP, we have a specialist Brexit team who are on hand to help with any queries or concerns you may have. Plus, we have created these checklists: Brexit Planning - Import Checklist and Brexit Planning - Export Checklist
Written by James Houseman at BHP, TAB Member. James has recently joined BHP as a Senior Manager in the Leeds office. He specialises in tax and finance and has previously roles at McLaren Automotive Ltd and KPMG. To get in touch with BHP, visit their website.
