UK customs processes for rest of the world trade will not be affected.
However, as a business trading with the rest of the world, you may find you will need to adapt certain systems or processes.
This is because the EU facilitated some trading processes with the rest of the world in order to make them smoother for EU members, and which UK traders may have used through the UK’s membership. You may also find that it’s different when dealing with EU-based customs intermediaries.
HMRC is currently introducing its new Customs Declaration Service (CDS), which replaces its Customs Handling of Import and Export Freight (CHIEF) system. Read information about how CDS is being introduced and what businesses need to do to prepare on GOV.UK
How VAT accounting processes will change
If the UK leaves the EU without an agreement, the government will introduce postponed accounting for import VAT on goods brought into the UK from the EU.
This means that UK VAT registered businesses importing goods to the UK will be able to account for import VAT on their VAT return, rather than paying import VAT when the goods arrive at the UK border. This will apply to imports from the EU and non-EU countries.
To reach this decision, the government took into account the views of businesses and sought to mitigate any adverse cash-flow impacts and ensure that VAT processes are kept as close as possible to what they are now.
To ensure equity of treatment, in a ‘no deal’ scenario, businesses will be able to account for their import VAT from non-EU countries in the same way, which will help to make the most of trading opportunities around the world.
We’ll issue more guidance setting out further detail on accounting and record keeping requirements soon.
If the UK leaves the EU without an agreement, UK VAT will be payable on goods entering the UK as parcels, sent by overseas businesses, unless they are already relieved from VAT under domestic rules (for example, zero-rated children’s clothing).
For parcels valued up to and including £135, of non-excise goods, the government will use a technology-based solution to allow VAT to be collected from the business selling the goods into the UK.
If the parcels are worth more than £135, as a UK business you will still need to pay VAT, in line with current procedures. This includes procedures for all excise goods sent as parcels and potentially in cases where your supplier has not complied with HMRC’s new parcels policy. More information will be available soon.
Changes to VAT IT systems
EU VAT registration number validation
This service allows businesses to check whether a customer or supplier’s VAT number is valid. You will still be able to use this service to check the validity of EU business VAT registration numbers. UK VAT registration numbers will no longer be part of this service. In the event of ‘no deal’, HMRC is developing a system that can continue to validate UK VAT numbers. We know this is important for certain businesses in order to carry out due diligence.
Transit of non-EU goods within the EU
The Common Transit Convention (CTC) facilitates cross-border movements of goods between contracting parties to the Convention, by enabling any charges due on those goods to be paid only in their country of destination.
The UK is currently party to the CTC by virtue of its membership of the EU. Following a successful negotiation, the UK will remain in the CTC after the UK leaves the EU. As well as retaining its benefits for current users, this will also help trade move freely to and from the UK after leaving the EU.
It will provide cash flow benefits to traders and aid trade flow at key points of entry into the UK and exports, as traders will only have to make customs declarations and pay import duties when they arrive at their final destination.
How excise processes will change
If the UK leaves the EU without a deal, the Excise Movement and Control System (EMCS) will no longer be used to move duty-suspended excise goods traded with the EU, but will still be used to move duty-suspended excise goods internally within the UK.
There won’t be any changes if you are currently exporting duty suspended alcohol, tobacco or fuel to the rest of the world.
Unless any simplified arrangements apply, you will continue to use EMCS to record duty-suspended movements of excise goods to and from places of export or import in the UK. You’ll also need to submit declarations to customs or employ a customs agent to clear the goods for export.
There will also be no changes if you are currently exporting duty paid alcohol, tobacco or fuel with the rest of the world. You will still be able to reclaim UK excise duty paid (Drawback) on exports to the rest of the world, provided you meet certain conditions – for example, having evidence to prove that the goods have left the UK.
Existing trade agreements with non-EU countries
If the UK leaves the EU without a deal, the government will seek to bring into force bilateral UK-third country agreements that replicate the effects of existing EU free trade agreements from exit day, or as soon as possible thereafter.
These new agreements will replicate existing EU agreements and the same preferential effects with third countries as far as possible, while making the technical changes needed to ensure the agreements operate in a bilateral context. Ministers and officials are engaging regularly with partner countries to complete this work. The timing of when we reach final agreements with partner countries will depend on our ongoing discussions with them.
The government’s intention is that the effects of new bilateral agreements will be identical to, or substantially the same as, the EU agreements they replace. However, if you use current EU free trade agreements you should be aware that, in contrast to the current situation and during any Implementation Period, there may be practical changes to how you make use of preferences under these new agreements.
For example, UK and EU content will be considered distinct, and each new agreement will individually specify what origin designations may be used to qualify for preferences.
The government will aim to limit these changes as far as possible, but the final form of new agreements and any resulting changes will depend on ongoing discussions with our trading partners.
The government will publish a report before these new free trade agreements are ratified on any significant changes to the new trade-related provisions.
Where arrangements to maintain particular preferences in a ‘no deal’ scenario are not in place with a particular country by the date the UK exits the EU, trade with that country would take place on World Trade Organization (WTO) terms, which means you would pay the applied Most Favoured Nation tariff. This is the tariff applied equally to all countries in the absence of preferential arrangements.
In the event of no deal, the government will determine and publish a new UK Most Favoured Nation tariff schedule before we leave the EU.
Importing from developing countries under the EU’s Generalised Scheme of Preferences
If the UK leaves the EU without a deal, the EU’s Generalised Scheme of Preferences (GSP) for developing countries will no longer apply to the UK.
The UK government will implement its own independent GSP scheme for day one of a ‘no deal’ scenario, with its own administration arrangements – but will aim to retain much of the same existing administration arrangements as the EU.
To ease the transition, the UK will retain the same qualifying operations as the EU’s rules of origin and will continue to use FORM A as proof of origin.
If the UK is no longer able to use the EU’s Registered Exporter Scheme (REX) then REX may become an invalid proof of origin mechanism. FORM A will be valid in this case.
Actions you can take now
You should consider now the effect of a ‘no deal’ exit on your business:
- Talk to your courier, haulier or freight forwarder to explore how changes to transit systems may impact your business and how your goods are moved. For example, if you are doing business with the rest of the world you may wish to explore direct imports to the UK instead of transhipment via the EU.
- If you import from developing countries using the EU’s Generalised Scheme of Preferences, you should consider the effect of a ‘no deal’ scenario on your business.
- Stay up-to-date with these changes by registering for email alerts. Follow the link, add your email address, select ‘Submit’, select ‘Add subscription’ and choose ‘EU Exit’ then select ‘Submit’.