Our guide to exporting and importing from the EU post Brexit
Following the end of the Brexit transition period, the UK has left the EU with an all-new trade agreement in place.
In principle, the agreement itself is based on ‘zero tariffs and zero quotas’. The new regime does, however, mean new customs controls. As a result, businesses that import and export to EU countries have a whole new set of requirements to get to grips with.
To help navigate the new rules, here's what you need to be aware of, together with links to sources of further information.
Rules for importing
Understand your sector-specific rules
Depending on the products you are moving into or out of the EU, you may need additional approvals, certifications or registrations. Special rules also apply to items on the controlled goods list (e.g. high-risk animal products, alcohol and tobacco). The British Chambers of Commerce has produced a rundown of key changes impacting different industry sectors. You can access this here.
Check you have an EORI number
To import or export goods to or from the EU, your business will need an Economic Operator Registration and Identification (EORI) number. You may in fact need to use multiple EORIs, depending on the lotion of your business and the type of goods you handle. Also, special rules apply if you are moving goods between Great Britain and Northern Ireland.
Back in 2019, the government started issuing EORI numbers to businesses it believed would require them. If you haven’t received your number, or to make sure you have the right one, you can check the position here.
Get the correct commodity code
Commodity codes are used for the classification of goods to ensure that the correct tariffs and VAT (if any) are applied. These codes are required for import and export documentation. To identify the correct code for the goods you wish to import, you can use the government’s free online look-up tool.
Check the tariffs position
Under the new agreement, there is no tariff charge or quotas on goods that formerly moved freely during the UK’s EU membership. This is referred to as ‘preferential treatment’.
However, to claim preferential treatment, you need to follow the ‘rules of origin’. In summary, these say that the goods (or originating materials used to make them) must originate in the UK or EU. Full government guidance on this can be found here.
Consider using a third party
If you are dealing with a steady flow of items to and from the EU, life becomes much easier with a customs intermediary working on your behalf. These agents fall into two main categories.
A customs agent (aka customs broker) makes sure you keep on top of all regulations, ensuring that you have all relevant paperwork, notifications and licenses in place for imports & exports.
A freight forwarder specialises primarily in the logistics of transporting your goods across borders. However, many freight forwarders can also perform the role of a customs agent, ensuring smooth end-to-end processing, with all requirements taken care of. To source a partner, starting points include the British International Freight Association, along with the Institute of Export.
Register for Simplified Customs Declarations
As part of a period of adjustment, up to 30 June 2021, importers can choose to defer customs declarations and payments for up to six months after the import date. The deferred payment element of this will come to an end from 1 July 2021, although the deferred declaration system looks set to continue.
Before importing, this basically allows you to submit a simplified customs declaration. Within the subsequent six-month period, you send HMRC a supplementary, more detailed declaration, at which point, any customs and VAT payable becomes due.
Linked to this, you will probably also need to set up a duty deferment account. The benefit of this is that it allows you to pay any duties and VAT due on a monthly basis rather than immediately upon import. If your business is VAT registered, you’ll also need to use postponed VAT.
The simplest way of handling this will be through an intermediary (see above).
Review your Incoterms
If it has been a while since you looked at the smallprint on your customer or supplier agreements, now’s the time for a review.
These contracts are usually built around Incoterms: a framework of standard terms and conditions designed to give clarity on who is responsible for what.
When it comes to cross-border transactions, the standard terms address matters such as duty and VAT payments, agreed points of risk transfer, respective responsibilities for arranging customs clearance and other paperwork, as well as responsibility for transport costs.
If you find yourself at cross-purposes with other parties in relation to your agreements, it can lead to problems in the supply chain and may cause unnecessary conflicts. Make sure you are clear on your obligations to avoid being exposed to any unintended risk.
Once again, your customs agent should be able to review your terms and suggest any necessary amendments.
Check your VAT position
Domestic VAT rules remain unchanged.
However, now that the UK has left the EU Taxation and Customs Union, it means a different system for handling VAT for imports and exports.
If you are importing goods into the UK from the EU (or from anywhere else in the world), then so long as the consignment value is not less than £135, it’s possible to use the postponed VAT accounting system. This means you account for import VAT on your VAT Return, rather than having to pay for it immediately (good news for cash flow).
Exports to EU countries are now treated in the same way as exports to elsewhere in the world. Namely, they should be zero-rated for UK VAT. Please note: this does not mean that you can forget about VAT for EU exports. You still have to include the exports as part of your VAT accounting - albeit at a 0% rate. If you are selling to consumers, you may also need to appoint fiscal representatives in multiple EU states, depending on the requirements of the various countries in which you sell.
Rules for exports
Get an EORI number
To export goods out of the UK, you will need a UK EORI number (beginning with GB or XI). If you are moving goods to an EU warehouse, you will need your own EU EORI number. Further details from the government are here.
Check your community codes
The importer in the EU may need to pay tax on what you export to them. So, as with importing, you will need to ensure you are using the correct commodity codes.
The easiest way to deal with export declarations is through a customs broker, fast parcel operator or freight forwarder. If you prefer to deal with it yourself, you will need to register to use the National Export System (NES).
You should check if the goods you are selling require export licences, and ensure that you have the licences in place prior to export. There’s a step-by-step guide to this here.
Reducing your admin burden
Right now, many businesses find themselves grappling with the twin pressures of fallout from the pandemic coupled with an entirely new set of rules for EU trading.
Fortunately, MJH Accountancy offers a range of services designed to reduce your admin burden, to do more with less, and to focus on your core business. From VAT and financial reporting through to advice on choosing the best resource planning software, we’re here to help. For a targeted assessment of your needs, speak to MJH Accountancy today.